The progression of the morphogenetic furrow in the developing Drosophila eye is an early metamorphic, ecdysteroid-dependent event. Although Ecdysone receptor-encoded nuclear receptor isoforms are the only known ecdysteroid receptors, we show that the Ecdysone receptor gene is not required for furrow function. DHR78, which encodes another candidate ecdysteroid receptor, is also not required. In contrast, zinc finger-containing isoforms encoded by the early ecdysone response gene Broad-complex regulate furrow progression and photoreceptor specification. br-encoded Broad-complex subfunctions are required for furrow progression and proper R8 specification, and are antagonized by other subfunctions of Broad-complex. There is a switch from Broad complex Z2 to Z1 zinc-finger isoform expression at the furrow which requires Z2 expression and responds to Hedgehog signals. These results suggest that a novel hormone transduction hierarchy involving an uncharacterized receptor operates in the eye disc.