We have characterised a P-element-induced prepupal mutant of Drosophila melanogaster which after an apparently normal embryonic and larval development fails to complete head eversion, an essential step in metamorphosis. The P-element insertion disrupts an ecdysone-regulated transcript which, although expressed during embryonic and larval stages, appears critical for preparing the late prepupal response to ecdysone. By a combination of molecular and genetic studies, in which we recovered new alleles, we show that the locus is complex, containing at least two distinct promoters. Its transcripts contain a short region described previously by R. Schüh et al. (1986, Cell 47, 1025-1032), who screened for homologues of the Krüppel gene. Our studies on the corresponding gene, named Krüppel-homolog (Kr-h), add to a growing body of evidence that specific isoforms of a number of key genes are implicated in both embryogenesis and metamorphosis.