Extracellular signalling molecules play many roles in the development of higher organisms. They are used reiteratively in different tissues and stages, but the response of the receiving cells is controlled in a context dependent manner. The pattern of expression of the signalling molecule Wingless/WNT in Drosophila is extraordinarily complex. We have studied the mechanism that controls its expression and function in the outer ring of the Drosophila wing hinge. Our findings indicate that wingless expression is controlled by a dual mechanism: its initial activation requires the product of zinc finger homeodomain 2 and is subsequently repressed by the product of the gene complex elbow/no ocelli. This tight regulation restricts the activation of wingless temporally and spatially. Later in development, wingless expression is maintained by an autoregulatory loop that involves the product of homothorax. We have analyzed the phenotype of a wingless allelic combination that specifically removes the outer ring, and our results show that Wingless is required to promote local proliferation of the wing base cells. Thus, cell proliferation in the proximal-distal axis is controlled by the sequential activation of wingless in the inner ring and the outer ring at different stages of development.