DHR38 is a member of the steroid receptor superfamily in Drosophila homologous to the vertebrate NGFI-B-type orphan receptors. In addition to binding to specific response elements as a monomer, DHR38 interacts with the USP component of the ecdysone receptor complex in vitro, in yeast and in a cell line, suggesting that DHR38 might modulate ecdysone-triggered signals in the fly. We characterized the molecular structure and expression of the Dhr38 gene and initiated an in vivo analysis of its function(s) in development. The Dhr38 transcription unit spans more than 40 kb in length, includes four introns, and produces at least four mRNA isoforms differentially expressed in development; two of these are greatly enriched in the pupal stage and encode nested polypeptides. We characterized four alleles of Dhr38: a P-element enchancer trap line, l(2)02306, which shows exclusively epidermal staining in the late larval, pre-pupal and pupal stages, and three EMS-induced alleles. Dhr38 alleles cause localized fragility and rupturing of the adult cuticle, demonstrating that Dhr38 plays an important role in late stages of epidermal metamorphosis.