Previous studies have implicated histone deacetylation and chromatin condensation as critical mechanisms of transcription repression in yeast and mammals. A specific histone deacetylase, Rpd3, interacts with a variety of sequence-specific transcriptional repressors, including Mad-Max heterodimers and members of the nuclear receptor superfamily. Here, we present evidence that a strong hypomorphic mutation in the Drosophila Rpd3 gene causes embryonic lethality and a specific pair-rule segmentation phenotype. The analysis of a number of segmentation genes suggests that the repressor function of Even-skipped (Eve) may be diminished, causing an indirect loss of Ftz-mediated activation of engrailed. The relatively mild defects observed in Rpd3 mutants suggest that the recently identified Groucho and dCtBP corepressor proteins do not function solely through the recruitment of histone deacetylases. We discuss the possibility that Eve mediates multiple mechanisms of repression, so that Rpd3 mutants disrupt the regulation of just a subset of Eve target genes.