||n the fruit fly Drosophila melanogaster, a pulse of the steroid hormone ecdysone triggers metamorphosis. Ecdysone activates a genetic regulatory hierarchy that can be visualized as a reproducible pattern of puffs in the polytene chromosomes of the larval salivary gland. A model for ecdysone-regulated puffing suggests that the so-called early puffs (genes) are directly induced by ecdysone and that the protein products of these early genes induced a large set of the late puffs (genes) as a secondary response to the hormone. An early ecdysone-inducible gene, E74, was cloned and characterized. This gene contains two transcription units, E74A and E74B. The two E74 transcripts produce related DNA-binding proteins that bind to similar sequences via a common DNA-binding domain. This common DNA-binding domain, the ETS domain, consists of a stretch of $/sim$85 amino acids that is similar to the ets-1 oncoprotein and directs binding to similar DNA sequences. In addition, Northern blot analysis of RNA isolated from staged animals and cultured larval organs was used to study the transcriptional regulation of E74A and E74B as well as the early ecdysone-inducible transcripts of E75 (E75A, E75B and E75C), the BR-C and EcR. From this, the pattern of early promoter activity was defined in terms of two distinct responses to ecdysone. The class I early transcripts (E74B and EcR) are induced by lower ecdysone concentrations and repressed at higher concentrations. In contrast, the class II early transcripts (E74A, E75A and E75B) are induced by higher ecdysone concentrations. Hence, class I transcripts are induced early in third instar larvae and mid-prepupae with the leading edges of the ecdysone pulses and repressed with the subsequent peaks in hormone titer, as the class II RNAs are induced. The BR-C transcripts appear to have both class I and class II characteristics. Molecular analysis of BR-C mutants demonstrated that the npr1 and 2Bc, but not the br and rbp, functions are required for complete ecdysone-induction of E74A and E75A transcription. Based on these studies, a modified model for the ecdysone regulatory hierarchy was proposed.