This article describes the mechanisms associated with ectoderm differentiation during sea urchin embryogenesis. Using animal half explants and molecular markers for oral and aboral ectoderm cells, we present evidence that inLytechinus pictus, two signals from underlying vegetal blastomeres are required for normal ectoderm differentiation. One signal induces the expression of aboral ectoderm genes and a second restricts oral ectoderm expression to the oral side of the embryo.Strongylocentrotus purpuratusanimal halves behave somewhat differently thanLytechinus pictusin their ability to express aboral ectoderm-specific genes. In order to determine how ectoderm genes are activated in early development, we have analyzed the transcriptional control region of the aboral ectoderm-specificSpec2agene. This control region confers aboral ectoderm-specific expression onSpec2aby means of an aboral ectoderm/mesenchyme cell-specific enhancer and a mesenchyme cell repressor element. TheSpec2aenhancer contains multiple DNA-binding sites for SpOtx, a homeobox transcription factor related toDrosophilaorthodenticle and mouse Otx1 and Otx2. SpOtx is present throughout development but unexpectedly, at stages before late cleavage is found mainly in the cytoplasm. Between late cleavage and early blastula stages, SpOtx translocates into the nucleus. Overexpressing SpOtx by injecting SpOtx mRNA into living eggs results in a thin epithelial ball with essentially all cells displaying aboral ectoderm properties. We suggest a model whereby overexpression of SpOtx leads to premature nuclear translocation and conversion of all progenitor cells in the embryo to an aboral ectoderm fate. Our results imply that SpOtx plays a major role in the differentiation of aboral ectoderm cells during sea urchin development.