The molecular mechanisms involved in glial/neuronal fate decisions during embryonic development are largely unknown. Here we show that the segment-polarity gene engrailed, which encodes a homeodomain protein, controls these decisions within an insect CNS lineage. The grasshopper median neuroblast (MNB) generates both neurons and midline glia in distinct temporal phases. engrailed expression in MNB progeny can be inhibited by injection of antisense oligodeoxynucleotides into the MNB nucleus. This produces a phenotype in which the midline glia do not develop and extra midline neurons are generated. In the absence of engrailed function, midline glial precursors are apparently converted into neuronal precursors. Thus, engrailed is required for execution of the decision between the glial and neuronal fates.