Nuclear hormone receptors (NHRs) are important regulators of development and metabolism in animal species. They are characterized by the ability to regulate gene expression in response to the binding of small hydrophobic molecules, hormones, metabolites, and xenobiotics. The Caenorhabditis elegans genome contains 284 sequences that share homology to vertebrate and insect NHRs, a surprisingly large number compared with other species. The majority of C. elegans NHRs are nematode-specific and are referred to as supplementary nuclear receptors (supnrs) that are thought to have originated by duplications of an ancient homolog of vertebrate HNF4. Here, we report on the function of NHR-40, a member of a subgroup of 18 Caenorhabditis elegans supnrs that share DNA-binding domain sequence CNGCKT. NHR-40 is expressed from at least two promoters, generates at least three transcripts, and is detectable in pharyngeal, body wall, and sex muscles as well as in a subset of neurons. The downregulation of nhr-40 by RNAi, or a mutant with an intronic region deletion, results in late embryonic and early larval arrest with defects in elongation and morphogenesis. The nhr-40 loss of function phenotype includes irregular development of body wall muscle cells and impaired movement and coordination resembling neuromuscular affection. NHR-40 joins the list of C. elegans NHRs that regulate development and suggests that members of extensive nematode supnr family have acquired varied and novel functions during evolution.