ABSTRACT Mutations in the Ultrabithorax (Ubx) gene cause homeotic transformation of the normally two-winged Drosophila into a four-winged mutant fly. Ubx encodes a HOX family transcription factor that specifies segment identity, including transformation of the second set of wings into rudimentary halteres. Ubx is known to control the expression of many genes that regulate tissue growth and patterning, but how it regulates tissue morphogenesis to reshape the wing into a haltere is still unclear. Here, we show that Ubx acts by repressing the expression of two genes in the haltere, Stubble and Notopleural, both of which encode transmembrane proteases that remodel the apical extracellular matrix to promote wing morphogenesis. In addition, Ubx induces expression of the Tissue inhibitor of metalloproteases in the haltere, which prevents the basal extracellular matrix remodelling necessary for wing morphogenesis. Our results provide a long-awaited explanation for how Ubx controls morphogenetic transformation.