The BMP-like signaling mediated by the ligands Dpp and Gbb is required to reinforce the development of most veins in the Drosophila wing. However, the formation of the cross veins is especially sensitive to reductions in BMP-like signaling. We show here that the formation of the definitive cross veins occurs after the initial specification of the longitudinal veins in a process that requires localized BMP-like activity. Since Dpp and Gbb levels are not detectably higher in the early phases of cross vein development, other factors apparently account for this localized activity. Our evidence suggests that the product of the crossveinless 2 gene is a novel member of the BMP-like signaling pathway required to potentiate Gbb of Dpp signaling in the cross veins. crossveinless 2 is expressed at higher levels in the developing cross veins and is necessary for local BMP-like activity. The Crossveinless 2 protein contains a putative signal or transmembrane sequence, and a partial Von Willebrand Factor D domain similar to those known to regulate the formation of intramolecular and intermolecular bonds. It also contains five cysteine-rich domains, similar to the cysteine-rich domains found in Chordin, Short Gastrulation and Procollagen that are known to bind BMP-like ligands. These features strongly suggest that Crossveinless 2 acts extracelluarly or in the secretory pathway to directly potentiate Dpp or Gbb signaling.