Ecdysteroids regulate a wide variety of cellular processes during arthropod development, yet little is known about the genes involved in the biosynthesis of these hormones. Previous studies have suggested that production of 20-hydroxyecdysone in Drosophila and other arthropods involves a series of cytochrome P450 catalyzed hydroxylations of cholesterol. In this report, we show that the disembodied (dib) locus of Drosophila codes for a P450-like sequence. In addition, we find that dib mutant embryos have very low titers of ecdysone and 20-hydroxyecdysone (20E) and fail to express IMP-E1 and L1, two 20E-inducible genes, in certain tissues of the embryo. In situ hybridization studies reveal that dib is expressed in a complex pattern in the early embryo, which eventually gives way to restricted expression in the prothoracic portion of the ring gland. In larval and adult tissues, dib expression is observed in the prothoracic gland and follicle cells of the ovaries respectively, two tissues known to synthesize ecdysteroids. Phenotypic analysis reveals that dib mutant embryos produce little or no cuticle and exhibit severe defects in many late morphogenetic processes such as head involution, dorsal closure and gut development. In addition, we examined the phenotypes of several other mutants that produce defective embryonic cuticles. Like dib, mutations in the spook (spo) locus result in low embryonic ecdysteroid titers, severe late embryonic morphological defects, and a failure to induce IMP-E1. From these data, we conclude that dib and spo likely code for essential components in the ecdysone biosynthetic pathway and that ecdysteroids regulate many late embryonic morphogenetic processes such as cell movement and cuticle deposition.