The GAGA factor (GAF), encoded by the Trithorax like gene (Trl) is a multifunctional protein involved in gene activation, Polycomb-dependent repression, chromatin remodeling and is a component of chromatin domain boundaries. Although first isolated as transcriptional activator of the Drosophila homeotic gene Ultrabithorax (Ubx), the molecular basis of this GAF activity is unknown. Here we show that dmTAF3 (also known as BIP2 and dTAF(II)155), a component of TFIID, interacts directly with GAF. We generated mutations in dmTAF3 and show that, in Trl mutant background, they affect transcription of Ubx leading to enhancement of Ubx phenotype. These results reveal that the gene activation pathway involving GAF is through its direct interaction with dmTAF3.