To identify genomic regions required for transcriptional regulation of Delta during early embryogenesis, constructs carrying promoter and gene fusions to the lacZ gene were used for germ line transformation. Most cis-regulatory sequences are dispersed throughout 6.6 kb of genomic DNA, 5' of the transcription start site; the first intron contains an enhancer element that increases the amount of RNA produced in several organs. A region was defined which drives Delta-lacZ RNA expression in clusters of neuroectodermal cells preceding and during SI neuroblast segregation. This pattern is regulated by genes of the AS-C (achaete-scute complex). To identify regulatory regions necessary for normal function of Delta during neural-epidermal lineage segregation, five minigenes consisting of fragments of the 5' genomic DNA fused to a cDNA encoding the entire protein sequence were tested for their ability to rescue the neural hyperplasia caused by a deletion of the Delta locus. Regulatory sequences required for this function are differentially distributed throughout 9 kb of genomic DNA upstream of the transcription start site. The possible significance of these findings with respect to the function of Delta during lineage segregation is discussed.