The early asymmetric cleavages of Caenorhabditis elegans embryos produce blastomeres with distinct developmental potentials. Here, we show that the caudal-like homeodomain protein PAL-1 is required to specify the somatic identity of one posterior blastomere in the 4 cell embryo. We find that pal-1 activity is sequentially restricted to this blastomere. First, at the 4 cell stage, it is translated only in the two posterior blastomeres. Then, its function is restricted to one of these blastomeres. This second targeting step is dependent on the activities of the posteriorly localized SKN-1 and asymmetrically segregated PIE-1 proteins. We propose that the segregation of PIE-1, combined with the temporal decay of SKN-1, targets pal-1 activity to this posterior lineage, thus coupling the regulation of this conserved posterior patterning gene to asymmetric cell cleavages.