Understanding the transcriptional pathways controlling tissue-specific gene expression is critical to unraveling the complex regulatory networks that underlie developmental mechanisms. Here, we assessed how the Drosophila crossveinless (cv) gene, that encodes a BMP-binding factor, is transcriptionally regulated in the developing embryonic tracheal system. We identify an upstream regulatory region of cv that promotes reporter gene expression in the tracheal precursors. We further demonstrate that this promoter region is directly responsive to the basic, helix-loop-helix-PAS domain factors Trachealess (Trh) and Tango (Tgo), that function to specify tracheal fate. Moreover, cv expression in embryos is lost in trh mutants, and the integrity of the Trh/Tgo binding sites are required for promoter-lacZ expression. These findings for the first time elucidate the transcriptional regulation of one member of a family of BMP binding proteins, that have diverse functions in animal development.