cDNA clones originating from the engrailed gene of Drosophila have been isolated from recombinant phage libraries that were made using poly(A)+ RNA extracted from early embryos. The DNA sequence of one of these clones includes a homeo box, a 180 bp sequence present in several other Drosophila genes important in formation of body pattern during development. The homeo boxes found in the other Drosophila genes, as well as in cognate sequences from a wide range of segmented animals, including higher vertebrates, are highly conserved. By contrast, the homeo box within the engrailed gene diverges substantially and, unlike the other homeo boxes, is interrupted by an intervening sequence. The engrailed homeo box is located near the 3' end of a 1700 bp open reading frame. If translated, this sequence would produce a protein of unusual composition. We also show that a neighboring gene has a large region with strong homology to engrailed, and that it also contains a homeo box.