The NDNF-like factor Nord is a Hedgehog-induced extracellular BMP modulator that regulates Drosophila wing patterning and growth.

Hedgehog (Hh) and Bone Morphogenetic Proteins (BMPs) pattern the developing Drosophila wing by functioning as short- and long-range morphogens, respectively. Here, we show that a previously unknown Hh-dependent mechanism fine-tunes the activity of BMPs. Through genome-wide expression profiling of the Drosophila wing imaginal discs, we identify nord as a novel target gene of the Hh signaling pathway. Nord is related to the vertebrate Neuron-Derived Neurotrophic Factor (NDNF) involved in congenital hypogonadotropic hypogonadism and several types of cancer. Loss- and gain-of-function analyses implicate Nord in the regulation of wing growth and proper crossvein patterning. At the molecular level, we present biochemical evidence that Nord is a secreted BMP-binding protein and localizes to the extracellular matrix. Nord binds to Decapentaplegic (Dpp) or the heterodimer Dpp-Glass-bottom boat (Gbb) to modulate their release and activity. Furthermore, we demonstrate that Nord is a dosage-dependent BMP modulator, where low levels of Nord promote and high levels inhibit BMP signaling. Taken together, we propose that Hh-induced Nord expression fine-tunes both the range and strength of BMP signaling in the developing Drosophila wing.