Although functions for the steroid hormone ecdysone during Drosophila metamorphosis have been well established, roles for the embryonic ecdysone pulse remain poorly understood. We show that the EcR-USP ecdysone receptor is first activated in the extraembryonic amnioserosa, implicating this tissue as a source of active ecdysteroids in the early embryo. Ecdysone signaling is required for germ band retraction and head involution, morphogenetic movements that shape the first instar larva. This mechanism for coordinating morphogenesis during Drosophila embryonic development parallels the role of ecdysone during metamorphosis. It also provides an intriguing parallel with the role of mammalian extraembryonic tissues as a critical source of steroid hormones during embryonic development.