The steroid hormone ecdysone directly induces a small set of early genes, visible as puffs in the larval salivary gland polytene chromosomes, as it signals the onset of Drosophila metamorphorsis. The products of these genes appear to function as regulators that both repress their own expression and induce a large set of secondary-response late genes. We have identified recessive loss-of-function mutations in the early gene E74, a member of the ets protooncogene family that encodes two related DNA-binding proteins, E74A and E74B. These mutations cause defects in pupariation and pupation, and result in lethality during metamorphosis. Here we extend our phenotypic characterization of the E74A and E74B mutant alleles to the molecular level by examining their effects on the transcription of over 30 ecdysone-regulated genes. We show that the transcription of most ecdysone primary-response genes during late larval and prepupal development is unaffected by the E74 mutations. Rather, we find that E74 is necessary for the appropriate regulation of many ecdysone secondary-response genes. E74B is required for the maximal induction of glue genes in mid third instar larval salivary glands, while E74A is required in early prepupae for the proper timing and maximal induction of a subset of late genes. E74 activity is also necessary for the correct regulation of genes expressed predominantly in the fat body, epidermis or imaginal discs. These observations confirm that E74 plays a critical role in regulating transcription during the early stages of Drosophila metamorphosis. In addition, the widespread effects of the E74 mutations on transcription indicate that E74 functions in regulatory hierarchies not only in the larval salivary gland, but throughout the entire organism.