In order to identify functionally important regions of a neuropeptide gene in Drosophila melanogaster, we have studied its occurrence in related species and have characterized the structure of a homologous gene in Drosophila virilis. The melanogaster gene encodes a precursor that contains 13 neuropeptides related to the molluscan tetrapeptide FMRFamide (Nambu et al., 1988; Schneider and Taghert, 1988). Using the melanogaster gene as a probe in Southern blot analysis, related sequences were detected in DNA from each of 7 species tested. D. virilis, which is estimated to have diverged from D. melanogaster between 60 and 80 million years ago (Throckmorton, 1975), was chosen for more detailed study. Immunocytochemical staining using an antibody to authentic FMRFamide revealed a similar set of immunoreactive neurons in the CNS of larvae from the 2 Drosophila species. Using a melanogaster gene probe, overlapping clones were isolated from a virilis genomic library; DNA sequence analysis indicated the presence of a homologous gene. Comparisons of the genes and deduced proteins between the 2 species revealed the following points. (1) Both genes are divided into 2 exons: in D. melanogaster the exons are 106 and 1352 bp long; in D. virilis, they are 169 and at least 1232 bp long; in both species, the intron is approximately 2.5 kb long. (2) The sequence of exon I has largely diverged, and in neither species are exon I sequences translated. In this vicinity of the gene, sequence conservation is limited to a 67 bp region that spans the TATA box and the RNA start site. (3) The deduced neuropeptide precursors have very similar sizes (347 vs 339 amino acids) and the presumed signal sequences are perfectly conserved. (4) While the melanogaster precursor contains 13 FMRFamide-related peptides, the virilis precursor contains only 10. (5) The sequences of some but not all of the FMRFamide-like peptides are perfectly conserved. (6) In the rest of the precursor, significant sequence conservation is found only in the N-terminal portion; immediately downstream of the final FMRFamide-like peptide, the protein sequences are highly divergent. (7) 5′ to the RNA start sites (1.2 kb of melanogaster DNA and 1.8 kb of virilis DNA), 17 small (9–52 base pairs) regions are evolutionarily conserved (greater than 80% sequence conservation). We discuss neuropeptide biosynthesis, the functions and evolution of FMRFamide-like neuropeptides in insects, and the cell-specific regulation of neuropeptide gene expression in the contexts of these results.