Intrasegmental patterning in the Drosophila embryo is regulated by cell-cell communication. One of the signaling pathways that operates to specify positional information throughout the segment is mediated by the wingless (wg) protein, which is the homolog of the proto-oncogene Wnt-1. The early role of wg is to stabilize engrailed (en) expression by initiating a phase of en autoregulation in the adjacent more posterior cells. Here, we report that the segment polarity gene zeste-white 3 (zw3; also known as shaggy) acts as a repressor of en autoregulation. Genetic epistasis experiments indicate that wg signaling operates by inactivating the zw3 repression of en autoactivation. In addition, we demonstrate that zw3 encodes the Drosophila homolog of mammalian glycogen synthase kinase-3.