ladybird early and ladybird late genes, tandemly located in the Drosophila 93E homeobox gene cluster, encode highly related homeodomain-containing transcription factors. Here we report the cloning of the complete cDNA sequences of both genes and a study of their expression and regulatory interactions with the segment polarity gene wingless in the epidermis. ladybird genes are co-expressed with wingless in epidermal cells close to the posterior parasegmental boundaries and in terminal regions of the body. In mutant embryos with altered wingless function, transcription of ladybird early and ladybird late is changed; it disappears completely from the epidermis in wingless-embryos, indicating wingless-dependence. After 6 hours of development, wingless expression is maintained by gooseberry in the ventral epidermis. However, in the dorsal epidermis and the terminal regions of the body, expression of wingless is independent of gooseberry but requires a wingless-ladybird regulatory feedback loop. Loss of ladybird function reduces the number of wingless-expressing cells in dorsal epidermis and leads to complete inactivation of wingless in the anal plate. Consequently, mutant ladybird embryos fail to develop anal plates and ubiquitous embryonic expression of either one or both ladybird genes leads to severe defects of the dorsal cuticle. Lack of late wingless expression and anal plate formation can be rescued with the use of a heat-shock-ladybird transgene.