The reorganization of mesenchymal cells into an epithelial sheet is a widely used morphogenetic process in metazoans. An example of such a process is the formation of the Drosophila larval midgut epithelium that develops through a mesenchymal-epithelial transition from endodermal midgut precursors. We have studied this process in wild type and a number of mutants that show defects in midgut epithelium formation. Our results indicate that the visceral mesoderm serves as a basal substratum to which endodermal cells have to establish direct contact in order to form an epithelium. Furthermore, we have analyzed the midgut phenotype of embryos mutant for the gene shotgun, and the results suggest that shotgun directs adhesion between midgut epithelial cells, which is independent from the adhesion between endoderm and visceral mesoderm.