The approximately 200 distinct neurons comprising each hemisegment of the Drosophila embryonic CNS are derived from a stereotypic array of approximately 30 progenitor stem cells, called neuroblasts (NBs). Each NB undergoes repeated asymmetric divisions to produce several smaller ganglion mother cells (GMCs), each of which, in turn, divides to produce two neurons and/or glia cells. To understand the process by which cell type diversity is generated in the CNS, we are focusing on identifying genes that affect cell identity in the NB4-2 lineage from which the RP2 motoneuron is derived. We show here that within the early part of the NB4-2 lineage, two closely linked and structurally related POU homeo domain genes, pdm-2 (dPOU28) and pdm-1 (dPOU19), both encode proteins that accumulate to high levels only in the first GMC (GMC4-2a) and not in its progeny, the RP2 motoneuron. Our results from the genetic and developmental analysis of pdm-1 and pdm-2 demonstrate that these genes are not required for the birth of GMC4-2a; however, they are both involved in specifying the identity of GMC4-2a and, ultimately, in the genesis of RP2 neurons, with pdm-2 being the more dominant player in this process. In mutant animals where both pdm-1 and pdm-2 functions are removed, GMC4-2a fails to express markers consistent with a GMC4-2a identity and no mature (Eve protein expressing) RP2 neurons are produced. We demonstrate that in some mutant combinations in which no mature RP2 neurons are produced, some GMC4-2a cells can nevertheless divide. Hence, the failure of the POU mutants to produce mature RP2 neurons is not attributable to a block in GMC4-2a cell division per se but, rather, because the GMC4-2a cells fail to acquire their correct cellular identity.