The polyhomeotic (ph) locus of Drosophila is a complex locus essential for the maintenance of segmental identity. Genetic analysis suggested that two independent units contribute to ph function. Comparison of genomic sequence shows that the ph locus has been duplicated, and that it contains proximal and distal transcription units. The proximal transcription unit encodes two embryonic mRNAs of 6.4 and 6.1 kb, and the distal unit encodes a 6.4-kb embryonic mRNA. The proximal and distal transcription units are differentially regulated at the mRNA level during development as shown by developmental Northern analysis. The distal protein is very similar to the proximal product, except for the absence of an amino terminal region, and a small region near the carboxy terminus. The long open reading frame in the distal cDNA does not begin with an ATG codon, and an internal ATG is used for a start codon. We show that the proximal protein occurs in two forms that are developmentally regulated, and that probably arise from use of two different initiator methionine codons. We find no evidence for differential binding of proximal and distal products to polytene chromosomes. Nevertheless, we show that mutations in the proximal and distal proteins have differing effects on regulation of a reporter under the control of a regulatory region from bithoraxoid, suggesting that ph proximal and distal proteins have different functions. These results show that the ph locus undergoes complex developmental regulation, and suggest that Polycomb group regulation may be more dynamic than anticipated.