We have analyzed the function of the Decapentaplegic (Dpp) and Hedgehog (Hh) signaling pathways in partitioning the dorsal head neurectoderm of the Drosophila embryo. This region, referred to as the anterior brain/eye anlage, gives rise to both the visual system and the protocerebrum. The anlage splits up into three main domains: the head midline ectoderm, protocerebral neurectoderm and visual primordium. Similar to their vertebrate counterparts, Hh and Dpp play an important role in the partitioning of the anterior brain/eye anlage. Dpp is secreted in the dorsal midline of the head. Lowering Dpp levels (in dpp heterozygotes or hypomorphic alleles) results in a 'cyclops' phenotype, where mid-dorsal head epidermis is transformed into dorsolateral structures, i.e. eye/optic lobe tissue, which causes a continuous visual primordium across the dorsal midline. Absence of Dpp results in the transformation of both dorsomedial and dorsolateral structures into brain neuroblasts. Regulatory genes that are required for eye/optic lobe fate, including sine oculis (so) and eyes absent (eya), are turned on in their respective domains by Dpp. The gene zerknuellt (zen), which is expressed in response to peak levels of Dpp in the dorsal midline, secondarily represses so and eya in the dorsomedial domain. Hh and its receptor/inhibitor, Patched (Ptc), are expressed in a transverse stripe along the posterior boundary of the eye field. As reported previously, Hh triggers the expression of determinants for larval eye (atonal) and adult eye (eyeless) in those cells of the eye field that are close to the Hh source. Eya and So, which are induced by Dpp, are epistatic to the Hh signal. Loss of Ptc, as well as overexpression of Hh, results in the ectopic induction of larval eye tissue in the dorsal midline (cyclopia). We discuss the similarities between vertebrate systems and Drosophila with regard to the fate map of the anterior brain/eye anlage, and its partitioning by Dpp and Hh signaling.