The majority of adult organs of a holometabolic insect like Drosophila melanogaster are derived from specific imaginal cells. These cells differ from their larval equivalents in many important cellular characteristics, ranging from the nature of the cell cycle to the timing and pattern of cellular differentiation. Here we describe the cellular, molecular and genetic characterization of a gene, headcase (hdc), which is required for imaginal cell development. hdc is the first gene to be described which is specifically expressed in all imaginal cells; this has allowed us to identify many imaginal primordia in the embryo and larval development. The Hdc protein is an extremely basic (pI 9.6) cytoplasmic protein with no obvious sequence similarities or conserved motifs. Interestingly, the spatial-temporal pattern of hdc expression prefigures imaginal cell re-entry into the mitotic cell cycle and persists until the final cell divisions. hdc null alleles have been isolated and found to cause pupal lethality, with dead pharate adults exhibiting defects in the differentiation of many adult tissues, most notably in head development. Ectopic expression of hdc, provided by a hdc-minigene, rescues the pupal lethality. Imaginal disc morphology in null mutants appears normal, therefore loss of hdc expression does not affect imaginal cell growth, but instead interferes with the ability of the imaginal primordia to differentiate properly during pupal development, suggesting that hdc may be involved in hormonal responsiveness during metamorphosis.