The basic–helix–loop–helix-PAS (bHLH–PAS) proteins comprise a prominent class of transcriptional regulators that control a variety of developmental and physiological events including neurogenesis, tracheal and salivary duct formation, toxin metabolism, circadian rhythms, response to hypoxia, and hormone receptor function. The bHLH–PAS proteins have a number of similarities with other bHLH protein subfamilies (Littlewood and Evan 1995). bHLH–PAS proteins usually function as dimeric DNA-binding protein complexes; although some bHLH–PAS proteins can form homodimers, the most common functional unit is comprised of heterodimers. These heterodimers consist of one partner that is broadly expressed, and another whose expression or function is restricted spatially, temporally, or by the presence of inducers. Just as other vertebrate and invertebrate bHLH proteins control cell lineage specification (Weintraub et al. 1991; Jan and Jan 1993), bHLH–PAS proteins are also important cell lineage regulators (Thomas et al. 1988, Isaacs and Andrew 1996; Wilk et al. 1996). The combinatorial and interactive properties of bHLH–PAS proteins provide a variety of potential mechanisms to control their function as transcriptional regulators, which may help explain their widespread use in complex biological events. The purpose of this review is to describe characteristics of the bHLH–PAS protein subfamily, in particular, how bHLH–PAS proteins control lineage-specific gene transcription and development of the Drosophila CNS midline cells and respiratory system, and to discuss the evolutionary implications of the bHLH–PAS/ Arnt regulatory cassette. The underlying mechanisms employed by the bHLH–PAS developmental regulatory proteins discussed here may prove to be common in both vertebrates and invertebrates, and provide a general understanding into how regulatory proteins control the formation of cell lineages.