The Dipteran flight appendages, the wings and halteres, develop from larval imaginal discs that also produce other sections of the second and third thoracic adult body segments. Loss of vestigial (vg) function in Drosophila selectively eliminates wing and haltere formation. Here, we show that vg expression is spatially restricted to the presumptive wing and haltere regions of these imaginal discs. An intronic regulatory element mediates this restriction and may elaborate upon cues that activate vg expression in the embryonic disc primordia. The nuclear vg protein lacks any recognized nucleic acid-binding motif but is comprised of two putative functional domains, one of which bears similarity to part of the Deformed homeotic protein and may mediate protein-protein interactions. These results suggest that vg is directly involved in determining which thoracic imaginal disc cells will form wings and halteres, perhaps by interacting with other nuclear regulatory proteins.