Filamentous fungi produce a number of small bioactive molecules as part of their secondary metabolism ranging from benign antibiotics such as penicillin to threatening mycotoxins such as aflatoxin. Secondary metabolism can be linked to fungal developmental programs in response to various abiotic or biotic external triggers. The velvet family of regulatory proteins plays a key role in coordinating secondary metabolism and differentiation processes such as asexual or sexual sporulation and sclerotia or fruiting body formation. The velvet family shares a protein domain that is present in most parts of the fungal kingdom from chytrids to basidiomycetes. Most of the current knowledge derives from the model Aspergillus nidulans where VeA, the founding member of the protein family, was discovered almost half a century ago. Different members of the velvet protein family interact with each other and the nonvelvet protein LaeA, primarily in the nucleus. LaeA is a methyltransferase-domain protein that functions as a regulator of secondary metabolism and development. A comprehensive picture of the molecular interplay between the velvet domain protein family, LaeA and other nuclear regulatory proteins in response to various signal transduction pathway starts to emerge from a jigsaw puzzle of several recent studies.