Deformed (Dfd) is a Drosophila homeotic selector gene required for normal development of maxillary segment morphology in the larval and adult head. Consistent with this function, Dfd transcripts are restricted to epidermal, mesodermal and neural cells in the embryonic mandibular and maxillary primordia. Previous studies have identified a far upstream element in Dfd sequences which functions as an epidermal-specific autoregulatory enhancer. In a search through 35 kb of Dfd sequences for additional transcriptional control elements, we have identified a 3.2 kb DNA fragment containing an enhancer that mimics the expression of Dfd in the subesophageal ganglion of the embryonic central nervous system. This Neural autoregulatory enhancer (NAE) maps in the large Dfd intron just upstream of the homeobox exon and requires Dfd protein function for its full activity. A 608 bp NAE subfragment retains regulatory function that is principally localized in the subesophageal ganglion. This small region of the Drosophila melanogaster genome contains numerous blocks of sequence conservation with a comparable region from the Dfd locus of D.hydei. A pair of conserved blocks of NAE sequence match a Dfd protein binding site in the epidermal autoregulatory element, while another conserved sequence motif is repeated multiple times within the 608 bp subelement.