The secreted proteins Wingless and Hedgehog are essential to the elaboration of the denticle pattern in the epidermis of Drosophila embryos. We show that signaling by Wingless and Hedgehog regulates the expression of veinlet (rhomboid) and Serrate, two genes expressed in prospective denticle belts. Thus, Serrate and veinlet (rhom) partake in the last layer of the segmentation cascade. Ultimately, Wingless, Hedgehog, Veinlet (an indirect activator of the Egfr) and Serrate (an activator of Notch) are expressed in non-overlapping narrow stripes. The interface between any two stripes allows a reliable prediction of individual denticle types and polarity suggesting that contact-dependent signaling modulates individual cell fates. Attributes of a morphogen can be ascribed to Hedgehog in this system. However, no single morphogen organises the whole denticle pattern.