We report here the identification of a unique vertebrate nuclear receptor, Tlx, which is expressed exclusively in the neuroepithelium of the embryonic brain. Sequence comparison reveals striking similarity to the product of the Drosophila terminal/gap gene tailless (tll), which is expressed in the embryonic brain and is required for brain development in flies. In vitro DNA-binding assays demonstrated that Tlx and Tll proteins share a target gene specificity that is unique among the nuclear receptor superfamily. Ectopic expression of Tlx in fly embryos caused a repression of segmentation comparable to that elicited by Tll. The similarities in structure, expression pattern, target gene specificity and phenotypes in transgenic flies suggest conservation of genetic programs upstream and downstream of this Tlx/Tll class of nuclear receptors during embryogenesis.