ABSTRACT The stereotyped pattern of veins in the Drosophila wing is generated in response to local EGF signalling. Mutations in the rhomboid (rho) gene, which encodes a sevenpass membrane protein required to enhance signalling transmitted by the EGF receptor (Egfr), inhibit vein development and disrupt the vein pattern. By contrast, net mutations produce ectopic veins in intervein regions. We have cloned the net gene and show that it encodes a basic HLH protein that probably acts as a transcriptional repressor. net and rho are expressed in mutually exclusive patterns during the development of the wing imaginal disc. Lack of net activity causes rho expression to expand, and vice versa. Furthermore, ectopic expression of net or rho results in their mutual repression and thus suppresses vein formation or generates tube-like wings composed of vein-like tissue. Egfr signalling and net exert mutually antagonising activities during the specification of vein versus intervein fate. While Egfr signalling represses net transcription, net exhibits a two-tiered control by repressing rho transcription and interfering with Egfr signalling downstream of Rho. Our results further suggest that net is required to maintain intervein development by restricting Egfr signalling, which promotes vein development, to the Net-free vein regions of the wing disc.