Most somatic cells in the nematode Caenorhabditis elegans arise from AB, the anterior blastomere of the 2-cell embryo. While the daughters of AB, ABa and ABp, are equivalent in potential at birth, they adopt different fates as a result of their unique positions. One such difference is that the distribution of epidermal precursors arising from ABp is reversed along the anterior-posterior axis relative to those arising from ABa. We have found that a strong mutation in the glp-1 gene eliminates this ABa/ABp difference. Furthermore, extensive cell lineage analyses showed that ABp adopts an ABa-like fate in this mutant. This suggests that glp-1 acts in a cellular interaction that makes ABp distinct from ABa. One ABp-specific cell type was previously shown to be induced by an interaction with a neighboring cell, P2. By removing P2 from early embryos, we have found that the widespread differences between ABa and ABp arise from induction of the entire ABp fate by P2. Lineage analyses of genetically and physically manipulated embryos further suggest that the identifies of the AB great-granddaughters (AB8 cells) are controlled by three regulatory inputs that act in various combinations. These inputs are: (1) induction of the ABp-specific fate by P2, (2) a previously described induction of particular AB8 cells by a cell called MS, and (3) a process that controls whether an AB8 cell is an epidermal precursor in the absence of either induction. When an AB8 cell is caused to receive a new combination of these regulatory inputs, its lineage pattern is transformed to resemble the lineage of the wild-type AB8 cell normally receiving that combination of inputs. These lineage patterns are faithfully reproduced irrespective of position in the embryo, suggesting that each combination of regulatory inputs directs a unique lineage program that is intrinsic to each AB8 cell.