In Drosophila, the imaginal discs are the primordia for adult appendages. Their proper formation is dependent upon the activation of the decapentaplegic (dpp) gene in a stripe of cells just anterior to the compartment boundary. In imaginal discs, the dpp gene has been shown to be activated by Hedgehog signal transduction. However, an initial analysis of its enhancer region suggests that its regulation is complex and depends upon additional factors. In order to understand how multiple factors regulate dpp expression, we chose to focus on a single dpp enhancer element, the dpp heldout enhancer, from the 3' cis regulatory disc region of the dpp locus. In this report, we present a molecular analysis of this 358 bp wing- and haltere-specific dpp enhancer, which demonstrates a direct transcriptional requirement for the Cubitus interruptus (Ci) protein. The results suggest that, in addition to regulation by Ci, expression of the dpp heldout enhancer is spatially determined by Drosophila TCF (dTCF) and the Vestigial/Scalloped selector system and that temporal control is provided by dpp autoregulation. Consistent with the unexpectedly complex regulation of the dpp heldout enhancer, analysis of a Ci consensus site reporter construct suggests that Ci, a mediator of Hedgehog transcriptional activation, can only transactivate in concert with other factors.