How morphological diversity arises through evolution of gene sequence is a major question in biology. In Drosophila, the genetic basis for body patterning and morphological segmentation has been studied intensively. It is clear that some of the genes in the Drosophila segmentation program are functioning similarly in certain other taxa, although many questions remain about when these gene functions arose and which taxa use these genes similarly to establish diverse body plans. Tardigrades are an outgroup to arthropods in the Ecdysozoa and, as such, can provide insight into how gene functions have evolved among the arthropods and their close relatives. We developed immunostaining methods for tardigrade embryos, and we used cross-reactive antibodies to investigate the expression of homologs of the pair-rule gene paired (Pax3/7) and the segment polarity gene engrailed in the tardigrade Hypsibius dujardini. We find that in H. dujardini embryos, Pax3/7 protein localizes not in a pair-rule pattern but in a segmentally iterated pattern, after the segments are established, in regions of the embryo where neurons later arise. Engrailed protein localizes in the posterior ectoderm of each segment before ectodermal segmentation is apparent. Together with previous results from others, our data support the conclusions that the pair-rule function of Pax3/7 is specific to the arthropods, that some of the ancient functions of Pax3/7 and Engrailed in ancestral bilaterians may have been in neurogenesis, and that Engrailed may have a function in establishing morphological boundaries between segments that is conserved at least among the Panarthropoda.