The steroid hormone 20-hydroxyecdysone (20E) initiates metamorphosis in insects by signaling through the ecdysone receptor complex, a heterodimer of the ecdysone receptor (EcR) and ultraspiracle (USP). Analysis of usp mutant clones in the wing disc of Drosophila shows that in the absence of USP, early hormone responsive genes such as EcR, DHR3 and E75B fail to up-regulate in response to 20E, but other genes that are normally expressed later, such as (&bgr;)-Ftz-F1 and the Z1 isoform of the Broad-Complex (BRC-Z1), are expressed precociously. Sensory neuron formation and axonal outgrowth, two early metamorphic events, also occur prematurely. In vitro experiments with cultured wing discs showed that BRC-Z1 expression and early metamorphic development are rendered steroid-independent in the usp mutant clones. These results are consistent with a model in which these latter processes are induced by a signal arising during the middle of the last larval stage but suppressed by the unliganded EcR/USP complex. Our observations suggest that silencing by the unliganded EcR/USP receptor and the subsequent release of silencing by moderate steroid levels may play an important role in coordinating early phases of steroid driven development.