The Drosophila Gli homolog Cubitus interruptus (Ci) controls the transcription of Hedgehog (Hh) target genes. A repressor form of Ci arises in the absence of Hh signalling by proteolytic cleavage of intact Ci, whereas an activator form of Ci is generated in response to the Hh signal. These different activities of Ci regulate overlapping but distinct subsets of Hh target genes. To investigate the mechanisms by which the two activities of Ci exert their opposite transcriptional effect, we dissect here the imaginal disc enhancer of the dpp gene, which responds to both activities of Ci. Within a minimal disc enhancer, we identify the DNA sequences that are necessary and sufficient for the control by Ci, show that the same sequences respond to the activator and repressor forms of Ci, and demonstrate that their activities can be replaced by a single synthetic Gli-binding site. We further show that the enhancer sequences of patched, a gene responding only to the activator form of Ci, effectively integrate also the repressor activity of Ci if placed into a dpp context. These results provide in vivo evidence against the employment of distinct binding sites for the different forms of Ci and suggest that target genes responding to only one form must have acquired distant cis-regulatory elements for their selective behavior.