Drosophila embryos lacking hindsight gene function have a normal body plan and undergo normal germ-band extension. However, they fail to retract their germ bands. hindsight encodes a large nuclear protein of 1920 amino acids that contains fourteen C2H2-type zinc fingers, and glutamine-rich and proline-rich domains, suggesting that it functions as a transcription factor. Initial embryonic expression of hindsight RNA and protein occurs in the endoderm (midgut) and extraembryonic membrane (amnioserosa) prior to germ-band extension and continues in these tissues beyond the completion of germ-band retraction. Expression also occurs in the developing tracheal system, central and peripheral nervous systems, and the ureter of the Malpighian tubules. Strikingly, hindsight is not expressed in the epidermal ectoderm which is the tissue that undergoes the cell shape changes and movements during germ-band retraction. The embryonic midgut can be eliminated without affecting germ-band retraction. However, elimination of the amnioserosa results in the failure of germ-band retraction, implicating amnioserosal expression of hindsight as crucial for this process. Ubiquitous expression of hindsight in the early embryo rescues germ-band retraction without producing dominant gain-of-function defects, suggesting that hindsight's role in germ-band retraction is permissive rather than instructive. Previous analyses have shown that hindsight is required for maintenance of the differentiated amnioserosa (Frank, L. C. and Rushlow, C. (1996) Development 122, 1343–1352). Two classes of models are consistent with the present data. First, hindsight's function in germ-band retraction may be limited to maintenance of the amnioserosa which then plays a physical role in the retraction process through contact with cells of the epidermal ectoderm. Second, hindsight might function both to maintain the amnioserosa and to regulate chemical signaling from the amnioserosa to the epidermal ectoderm, thus coordinating the cell shape changes and movements that drive germ-band retraction.