Genes that affect the expression of the NK-2 homeobox gene were identified by comparing the patterns of NK-2 mRNA in wild-type Drosophila embryos with patterns in mutant embryos that have defects in genes that are required to establish the ventral-dorsal pattern of primordia in the early embryo. The NK-2 gene was shown to be activated by dorsal in the ventral half of the embryo during the syncytial blastoderm stage of development. However, expression of the NK-2 gene is restricted to the ventral half of the ventrolateral neurogenic anlagen and part of the procephalic region. The NK-2 gene is not expressed in the mesodermal anlage due to repression by snail, in mesectodermal cells due to repression by single-minded, or in the lateral neuroectodermal and/or dorsal epidermal anlagen due to repression mediated indirectly by decapentaplegic. Twist activates the NK-2 gene in the posterior portion of the embryo or is a coactivator with dorsal. The stripes of medial neuroectodermal cells that synthesize NK-2 mRNA are converted into clusters of neuroectodermal cells that contain NK-2 mRNA by segmentally repeated decreases in NK-2 mRNA. Medial neuroblasts, neuroblasts in the posterior portion of segments, and some ganglion mother cells and neurons express the NK-2 gene. These results suggest that the NK-2 gene receives and integrates information from ventral-dorsal and anterior-posterior gradients of gene regulators and that ventral, dorsal, anterior, and posterior boundaries of each cluster of neuroectodermal cells that express NK-2 are determined independently.