The archipelago gene (ago) encodes the F-box specificity subunit of an SCF(skp-cullin-f box) ubiquitin ligase that inhibits cell proliferation in Drosophila melanogaster and suppresses tumorigenesis in mammals. ago limits mitotic activity by targeting cell cycle and cell growth proteins for ubiquitin-dependent degradation, but the diverse developmental roles of other F-box proteins suggests that it is likely to have additional protein targets. Here we show that ago is required for the post-mitotic shaping of the Drosophila embryonic tracheal system, and that it acts in this tissue by targeting the Trachealess (Trh) protein, a conserved bHLH-PAS transcription factor. ago restricts Trh levels in vivo and antagonizes transcription of the breathless FGF receptor, a known target of Trh in the tracheal system. At a molecular level, the Ago protein binds Trh and is required for proteasome-dependent elimination of Trh in response to expression of the Dysfusion protein. ago mutations that elevate Trh levels in vivo are defective in binding forms of Trh found in Dysfusion-positive cells. These data identify a novel function for the ago ubiquitin-ligase in tracheal morphogenesis via Trh and its target breathless, and suggest that ago has distinct functions in mitotic and post-mitotic cells that influence its role in development and disease.