The caudal (cad) gene of Drosophila encodes a maternal and a zygotic transcript which have different promoters. Both mRNAs contain the same open reading frame, including a homeo box. In situ hybridization and antibody staining show that the maternal RNA and protein are localized in an anteroposterior gradient during the syncytial blastoderm stage. The protein is found mainly in the nuclei and is also present in the pole cells. Zygotic RNA and protein are localized in the primordia of the terminal abdominal segment, the hindgut, and in the posterior midgut rudiment. In third instar larvae, cad is expressed in the gut, the gonads, and parts of the genital discs. It is the first homeo box-containing gene expressed in the germ line of Drosophila.