The transcriptional co-factor Chip acts with LIM-homeodomain proteins to set the boundary of the eye field in Drosophila.

Development involves the establishment of boundaries between fields specified to differentiate into distinct tissues. The Drosophila larval eye-antennal imaginal disc must be subdivided into regions that differentiate into the adult eye, antenna and head cuticle. We have found that the transcriptional co-factor Chip is required for cells at the ventral eye-antennal disc border to take on a head cuticle fate; clones of Chip mutant cells in this region instead form outgrowths that differentiate into ectopic eye tissue. Chip acts independently of the transcription factor Homothorax, which was previously shown to promote head cuticle development in the same region. Chip and its vertebrate CLIM homologues have been shown to form complexes with LIM-homeodomain transcription factors, and the domain of Chip that mediates these interactions is required for its ability to suppress the eye fate. We show that two LIM-homeodomain proteins, Arrowhead and Lim1, are expressed in the region of the eye-antennal disc affected in Chip mutants, and that both require Chip for their ability to suppress photoreceptor differentiation when misexpressed in the eye field. Loss-of-function studies support the model that Arrowhead and Lim1 act redundantly, using Chip as a co-factor, to prevent retinal differentiation in regions of the eye disc destined to become ventral head tissue.