Sox domain proteins encompass a conserved family of transcriptional regulators that are implicated in a variety of developmental processes in eukaryotes from worm to man. The Dichaete gene of Drosophila encodes a group B Sox protein related to mammalian Sox1, -2, and -3 and, like these proteins, it is widely and dynamically expressed throughout embryogenesis. In order to unravel new Dichaete functions, we characterized the organization of the Dichaete gene using a combination of regulatory mutant alleles and reporter gene constructs. Dichaete expression is tightly controlled during embryonic development by a complex of regulatory elements distributed over 25 kb downstream and 3 kb upstream of the transcription unit. A series of regulatory alleles which affect tissue-specific domains of Dichaete were used to demonstrate that Dichaete has functions in addition to those during segmentation and midline development previously described. First, Dichaete has functions in the developing brain. A specific group of neural cells in the tritocerebrum fails to develop correctly in the absence of Dichaete, as revealed by reduced expression of labial, zfh-2, wingless, and engrailed. Second, Dichaete is required for the correct differentiation of the hindgut. The Dichaete requirement in hindgut morphogenesis is, in part, via regulation of dpp, since ectopically supplied dpp can rescue Dichaete phenotypes in the hindgut. Taken together, there are now four distinct in vivo functions described for Dichaete that can be used as models for context-dependent comparative studies of Sox function.