Lack of both maternal and zygotic gene activity at the zeste-white 3 (zw3) locus causes severe developmental transformations. Embryos derived from germ cells that lack zw3+ gene activity die during embryogenesis and have a phenotype that is similar to that of embryos mutant for the segment polarity gene naked (nkd). In both nkd and germ line clone-derived zw3 embryos the pattern elements derived from the anterior-most part of each segment, the denticle belts, are deleted. Similar abnormal patterns of the zygotically expressed genes engrailed and Ultrabithorax are detected in both mutants, suggesting that the two genes are involved in the same developmental process. Additionally, the induction of clones of zw3 mutant cells in imaginal discs causes homeotic transformations of noninnervated hair cells into innervated sensory bristles. The multiple roles of zw3 during development and its possible interactions with the zygotic gene nkd are discussed.