Members of the Achaete-scute family of basic helix-loop-helix transcription factors are involved in cell fate specification in vertebrates and invertebrates. We have isolated and characterized a cnidarian achaete-scute homolog, CnASH, from Hydra vulgaris, a representative of an evolutionarily ancient branch of metazoans. There is a single achaete-scute gene in Hydra, and the bHLH domain of the predicted gene product shares a high degree of amino acid sequence similarity with those of vertebrate and Drosophila Achaete-scute proteins. In Hydra, CnASH is expressed in a subset of the interstitial cells as well as differentiation intermediates of the nematocyte pathways. In vitro translated CnASH protein can form heterodimers with the Drosophila bHLH protein Daughterless, and these dimers bind to consensus Achaete-scute DNA binding sites in a sequence-specific manner. Ectopic expression of CnASH in wild-type late third instar Drosophila larvae and early pupae leads to the formation of ectopic sensory organs, mimicking the effect of ectopic expression of the endogenous achaete-scute genes. Expression of CnASH in flies that are achaete and scute double mutants gives partial rescue of the mutant phenotype, comparable to the degree of rescue obtained by ectopic expression of the Drosophila genes. These results indicate that the achaete-scute type of bHLH genes for cell fate specification, as well as their mode of action, arose early and have been conserved during metazoan evolution.