The engrailed locus plays a unique and critical role in organizing the segmented body plan of Drosophila. Embryos lacking engrailed function die with fused, abnormal segments. Adult mosaics with patches of engrailed cells similarly suffer defects in all of their segments, but only with mutant cells that are in the posterior developmental compartment of each segment. The non-uniform requirement for engrailed function reflects the position-dependent expression of the engrailed locus and we demonstrate it here unambiguously by directly visualizing engrailed transcripts in frozen sections of embryos and larvae and in whole imaginal discs. These results demonstrate that developmental compartments subdivide the embryonic insect segments. In these and in the compartments of the later developmental stages the engrailed locus is expressed in the posterior but not the anterior compartments. With its role in controlling the developmental pathway of the posterior compartment cells, the engrailed locus may be an example of a binary developmental switch.