Patterning and differentiation of developing musculatures require elaborate networks of transcriptional regulation. In Drosophila, significant progress has been made into identifying the regulators of muscle development and defining their interactive networks. One major family of transcription factors involved in these processes consists of homeodomain proteins. In flies, several members of this family serve as muscle identity genes to specify the fates of individual muscles, or groups thereof, during embryonic and/or adult muscle development. Herein, we report on the expression and function of a new Drosophila homeobox gene during both embryonic and adult muscle development.The newly described homeobox gene, termed lateral muscles scarcer (lms), which has yet uncharacterized orthologs in other invertebrates and primitive chordates but not in vertebrates, is expressed exclusively in subsets of developing muscle tissues. In embryos, lms is expressed specifically in the four lateral transverse (LT) muscles and their founder cells in each hemisegment, whereas in larval wing imaginal discs, it is expressed in myoblasts that develop into direct flight muscles (DFMs), which are important for proper wing positioning. We have analyzed the regulatory inputs of various other muscle identity genes with overlapping or complementary expression patterns towards the cell type specific regulation of lms expression. Further we demonstrate that lms null mutants exhibit reduced numbers of embryonic LT muscles, and null mutant adults feature held-out-wing phenotypes. We provide a detailed description of the pattern and morphology of the direct flight muscles in the wild type and lms mutant flies by using the recently-developed ultramicroscopy and show that, in the mutants, all DFMs are present and present normal morphologies.We have identified the homeobox gene lms as a new muscle identity gene and show that it interacts with various previously-characterized muscle identity genes to regulate normal formation of embryonic lateral transverse muscles. In addition, the direct flight muscles in the adults require lms for reliably exerting their functions in controlling wing postures.