caudal (cad/Cdx) genes are essential for the formation of posterior structures in Drosophila, Caenorhabditis elegans, and vertebrates. In contrast to Drosophila, the majority of arthropods generate their segments sequentially from a posteriorly located growth zone, a process known as short-germ development. caudal homologues are expressed in the growth zone of diverse short-germ arthropods, but until now their functional role in these animals had not been studied. Here, we use RNA interference to examine the function of caudal genes in two short-germ arthropods, the crustacean Artemia franciscana and the beetle Tribolium castaneum. We show that, in both species, caudal is required for the formation of most body segments. In animals with reduced levels of caudal expression, axis elongation stops, resulting in severe truncations that remove most trunk segments. We also show that caudal function is required for the early phases of segmentation and Hox gene expression. The observed phenotypes suggest that in arthropods caudal had an ancestral role in axis elongation and segmentation, and was required for the formation of most body segments. Similarities to the function of vertebrate Cdx genes in the presomitic mesoderm, from which somites are generated, indicate that this role may also predate the origin of the Bilateria.