The Drosophila engrailed gene is expressed in the cells of the posterior developmental compartments. To investigate how the engrailed gene is regulated, chimeric genes consisting of fragments of the engrailed promoter and Escherichia coli lacZ were incorporated into the Drosophila germ line by P-element-mediated recombination. Fusion constructs with 7.5 kb of 5'-flanking sequence contain sufficient information to promote expression in most of the embryonic, larval, and imaginal posterior compartments; transformants with smaller fragments of the 5' region do not. Remarkably, of 20 independent transformants with constructs containing more than 1 kb of 5'-flanking DNA, 7 integrated in or around the engrailed locus. These strains inactivate engrailed function to varying degrees, and some express lacZ with a position- and temporal-specific program that is indistinguishable from the normal engrailed gene. Presumably, in these strains, lacZ is expressed in the context of the engrailed promoter.