Genes that specify cell fate can influence multiple aspects of neuronal differentiation, including axon guidance, target selection and synapse formation. Mutations in the unc-42 gene disrupt axon guidance along the C. elegans ventral nerve cord and cause distinct functional defects in sensory-locomotory neural circuits. Here we show that unc-42 encodes a novel homeodomain protein that specifies the fate of three classes of neurons in the Caenorhabditis elegans nervous system: the ASH polymodal sensory neurons, the AVA, AVD and AVE interneurons that mediate repulsive sensory stimuli to the nematode head and anterior body, and a subset of motor neurons that innervate head and body-wall muscles. unc-42 is required for the expression of cell-surface receptors that are essential for the mature function of these neurons. In mutant animals, the ASH sensory neurons fail to express SRA-6 and SRB-6, putative chemosensory receptors. The AVA, AVD and AVE interneurons and RME and RMD motor neurons of unc-42 mutants similarly fail to express the GLR-1 glutamate receptor. These results show that unc-42 performs an essential role in defining neuron identity and contributes to the establishment of neural circuits in C. elegans by regulating the transcription of glutamate and chemosensory receptor genes.