A novel leech homeobox gene, Lox10, is shown to encode a homeodomain sequence characteristic of a phyletically widespread NK-2 homeobox gene class. Lox10 expression was examined in leech embryos of various ages by in situ hybridization. In the unsegmented cephalic region, Lox10 RNA is expressed in a subset of the cells descended from the a' and b' micromeres, including a small cluster of cells, believed to be postmitotic neurons, within the supraesophageal ganglion of the central nervous system. Hybridization signal was not detected in either the mesoderm or ectoderm of the trunk segments, and the apparent restriction of Lox10 ectodermal expression to the nonsegmented cephalic domain resembles the restricted forebrain expression pattern of its mammalian homologues. Lox10 is also expressed within the endodermal tissues of the leech midgut, which arises by cellularization from a polynucleate syncytium. Endodermal expression is organized into a pattern of transverse stripes and spots which are aligned with the intersegmental septa, and which prefigure the pattern of gut wall constrictions observed at later stages of development. Lox10 is the first molecular marker of segmentally periodic endoderm differentiation reported for any animal species.