Patterning of the non-segmental termini of the Drosophila embryo depends on signalling via the Torso receptor tyrosine kinase (RTK). Activation of Torso at the poles of the embryo triggers restricted expression of the zygotic gap genes tailless (tll) and huckebein (hkb). In this paper, we show that the Groucho (Gro) corepressor acts in this process to confine terminal gap gene expression to the embryonic termini. Embryos lacking maternal gro activity display ectopic tll and hkb transcription; the former leads, in turn, to lack of abdominal expression of the Krüppel and knirps gap genes. We show that torso signalling permits terminal gap gene expression by antagonising Gro-mediated repression. Thus, the corepressor Gro is employed in diverse developmental contexts and, probably, by a variety of DNA-binding repressors.