We identified a novel regulatory loop within Drosophila's circadian clock. A screen for clock-controlled genes recovered vrille (vri), a transcription factor essential for embryonic development. vri is expressed in circadian pacemaker cells in larval and adult brains. vri RNA levels oscillate with a circadian rhythm. Cycling is directly regulated by the transcription factors dCLOCK and CYCLE, which are also required for oscillations of period and timeless RNA. Eliminating the normal vri cycle suppresses period and timeless expression and causes long-period behavioral rhythms and arrhythmicity, indicating that cycling vri is required for a functional Drosophila clock. We also show that dCLOCK and VRI independently regulate levels of a neuropeptide, pigment dispersing factor, which appears to regulate overt behavior.