Pulses of the steroid hormone ecdysone function as key temporal signals during insect development, coordinating the major postembryonic developmental transitions, including molting and metamorphosis. In vitro studies have demonstrated that the EcR ecdysone receptor requires an RXR heterodimer partner for its activity, encoded by the ultraspiracle (usp) locus. We show here that usp exerts no apparent function in mid-third instar larvae, when a regulatory hierarchy prepares the animal for the onset of metamorphosis. Rather, usp is required in late third instar larvae for appropriate developmental and transcriptional responses to the ecdysone pulse that triggers puparium formation. The imaginal discs in usp mutants begin to evert but do not elongate or differentiate, the larval midgut and salivary glands fail to undergo programmed cell death and the adult midgut fails to form. Consistent with these developmental phenotypes, usp mutants show pleiotropic defects in ecdysone-regulated gene expression at the larval-prepupal transition. usp mutants also recapitulate aspects of a larval molt at puparium formation, forming a supernumerary cuticle. These observations indicate that usp is required for ecdysone receptor activity in vivo, demonstrate that the EcR/USP heterodimer functions in a stage-specific manner during the onset of metamorphosis and implicate a role for usp in the decision to molt or pupariate in response to ecdysone pulses during larval development.