In Drosophila the eye-antennal disc gives rise to most adult structures of the fly's head. Yet the molecular basis for its regionalization during development is poorly understood. Here we show that homothorax is required early during development for normal eye development and is necessary for the formation of the ventral head capsule. In the ventral region of the disc only, homothorax and wingless are involved in a positive feedback loop necessary to restrict eye formation. homothorax is able to prevent the initiation and progression of the morphogenetic furrow without inducing wingless, which points to homothorax as a key negative regulator of eye development. In addition, we show that the iroquois-complex genes are required for dorsal head development antagonizing the function of homothorax in this region of the disc.