In the Bar mutation of Drosophila, ommatidial differentiation is known to be suppressed in the anterior portion of the eye. Our structural analysis shows that the Bar region contains a pair of homeo box genes, BarH1 and BarH2. These genes encode polypeptides similar in size and sequence and share a common homeo domain that is identical in sequence except for putative trans-activator-binding sites. We also show, by mosaic analysis and immunostaining with anti-BarH1/BarH2 antibodies, that BarH1 and BarH2 are not only specifically coexpressed but also functionally required in R1/R6 prephotoreceptors and primary pigment cells in developing ommatidia. In R1/R6, the expression of BarH1 and BarH2 appears to be regulated by rough and glass gene products. BarH1 and BarH2 proteins are essential to normal lens formation, formation of three types of pigment cells, and elimination of excess cells from mature ommatidia. Taken together, our results suggest that Bar homeo domain proteins may play key roles in the fate-determination processes of pigment cells and cone cells.