Sex Combs Reduced (SCR) activity is proposed to be required cell nonautonomously for determination of tarsus identity, and Extradenticle (EXD) activity is required cell autonomously for determination of arista identity. Using the ability of Proboscipedia to inhibit the SCR activity required for determination of tarsus identity, we found that loss-of-EXD activity is epistatic to loss-of-SCR activity in tarsus vs. arista determination. This suggests that in the sequence leading to arista determination SCR activity is OFF while EXD activity is ON, and in the sequence leading to tarsus determination SCR activity is ON, which turns EXD activity OFF. Immunolocalization of EXD in early third-instar larval imaginal discs reveals that EXD is localized in the nuclei of antennal imaginal disc cells and localized in the cytoplasm of distal imaginal leg disc cells. We propose that EXD localized to the nucleus suppresses tarsus determination and activates arista determination. We further propose that in the mesodermal adepithelial cells of the leg imaginal discs, SCR is required for the synthesis of a tarsus-inducer that when secreted acts on the ectoderm cells inhibiting nuclear accumulation of EXD, such that tarsus determination is no longer suppressed and arista determination is no longer activated.