Angiotensin-converting enzyme (ACE) is an evolutionarily conserved peptidyl dipeptidase. Mammalian ACE converts angiotensin I to the active vasoconstrictor angiotensin II, thus playing a critical role for homeostasis of the renin-angiotensin system. In Drosophila, the ACE homolog Ance is expressed in specific regions of developing organs, but its regulatory mechanism has not been identified. Here we provide evidence that Ance expression is regulated by a combination of Mad and Pannier (Pnr) in imaginal discs. We demonstrate that Ance expression in eye and wing discs depends on Dpp signaling. The Mad binding site of Ance regulatory region is essential for Ance expression. Ance expression in imaginal discs is also regulated by the GATA family transcription factor Pnr. Pnr directly regulates Ance expression by binding to a GATA site of Ance enhancer. In addition, Pnr and Mad physically and genetically interact. Ance null mutants are morphologically normal but show genetic interaction with dpp mutants. Furthermore, we show that human SMAD2 and GATA4 physically interact and ACE expression in HEK293 cells is regulated by SMAD2 and GATA4. Taken together, this study reveals a cooperative mechanism of Ance regulation by Mad and Pnr. Our data also suggest a conserved transcriptional regulation of human ACE.