In the mesoderm of Drosophila embryos, a defined number of cells segregate as 
progenitors of individual body wall muscles. Progenitors and their progeny 
founder cells display lineage-specific expression of transcription factors but 
the mechanisms that regulate their unique identities are poorly understood. Here 
we show that the homeobox genes ladybird early and ladybird late are expressed 
in only one muscle progenitor and its progeny: the segmental border muscle 
founder cell and two precursors of adult muscles. The segregation of the 
ladybird-positive progenitor requires coordinate action of neurogenic genes and 
an interplay of inductive Hedgehog and Wingless signals from the overlying 
ectoderm. Unlike so far described progenitors but similar to the neuroblasts, 
the ladybird-positive progenitor undergoes morphologically asymmetric division. 
We demonstrate that the ectopic ladybird expression is sufficient to change the 
identity of a subset of progenitor/founder cells and to generate an altered 
pattern of muscle precursors. When ectopically expressed, ladybird transforms 
the identity of neighbouring, Krüppel-positive progenitors leading to the 
formation of giant segmental border muscles and supernumerary precursors of 
lateral adult muscles. In embryos lacking ladybird gene function, specification 
of two ladybird-expressing myoblast lineages is affected. The segmental border 
muscles do not form or have abnormal shapes and insertion sites while the number 
of lateral precursors of adult muscles is dramatically reduced. Altogether our 
results provide new insights into the genetic control of diversification of 
muscle precursors and indicate a further similarity between the myogenic and 
neurogenic pathways.