Whereas the segmental nature of the insect head is well established, relatively little is known about the genetic and molecular mechanisms governing this process. In this paper, we report the phenotypic analysis of mutations in collier (col), which encodes the Drosophila member of the COE family of HLH transcription factors and is activated at the blastoderm stage in a region overlapping a parasegment (PS0: posterior intercalary and anterior mandibular segments) and a mitotic domain, MD2. col mutant embryos specifically lack intercalary ectodermal structures. col activity is required for intercalary-segment expression both of the segment polarity genes hedgehog, engrailed, and wingless, and of the segment identity gene cap and collar. The parasegmental register of col activation is controlled by the combined activities of the head-gap genes buttonhead and empty spiracles and the pair-rule gene even skipped; it therefore integrates inputs from both the head and trunk segmentation systems, which were previously considered as being essentially independent. After gastrulation, positive autoregulation of col is limited to cells of anterior PS0. Conversely, heat-pulse induced ubiquitous expression of Col leads to disruption of the head skeleton. Together, these results indicate that col is required for establishment of the PS(-1)/PS0 parasegmental border and formation of the intercalary segment. Our data support neither a simple combinatorial model for segmental patterning of the head nor a direct activation of segment polarity gene expression by head-gap genes, but rather argue for the existence of parasegment-specific second order regulators acting in the head, at a level similar to that of pair-rule genes in the trunk.