Here we present the identification and characterization of dHb9, the Drosophila homolog of vertebrate Hb9, which encodes a factor central to motorneuron (MN) development. We show that dHb9 regulates neuronal fate by restricting expression of Lim3 and Even-skipped (Eve), two homeodomain (HD) proteins required for development of distinct neuronal classes. Also, dHb9 and Lim3 are activated independently of each other in a virtually identical population of ventrally and laterally projecting MNs. Surprisingly, dHb9 represses Lim3 cell nonautonomously in a subset of dorsally projecting MNs, revealing a novel role for intercellular signaling in the establishment of neuronal fate in Drosophila. Lastly, we provide evidence that dHb9 and Eve regulate each other's expression through Groucho-dependent crossrepression. This mutually antagonistic relationship bears similarity to the crossrepressive relationships between pairs of HD proteins that pattern the vertebrate neural tube.