Ecdysteroids mediate a wide variety of developmental and physiological events in insects. In the postembryonic development of insects, ecdysone is synthesized in the prothoracic gland (PG). Although many studies have revealed the biochemical and physiological properties of the enzymes for ecdysteroid biosynthesis, most of the molecular identities of these enzymes have not been elucidated. Here we describe an uncharacterized cytochrome P450 gene, designated Cyp306a1, that is essential for ecdysteroid biosynthesis in the PGs of the silkworm Bombyx mori and fruit fly Drosophila melanogaster. Using the microarray technique for analyzing gene expression profiles in PG cells during Bombyx development, we identified two PG-specific P450 genes whose temporal expression patterns are correlated with changes in ecdysteroid titer during development. Amino acid sequence analysis showed that one of the Bombyx P450 genes belongs to the CYP306A1 subfamily. The temporal and spatial expression pattern of the Drosophila Cyp306a1 homolog is essentially the same as that of Bombyx Cyp306a1. We also found that Drosophila Cyp306a1 is disrupted in the phantom (phm) mutant, known also as the Halloween mutant. The morphological defects and decreased expression of ecdysone-inducible genes in phm suggest that this mutant cannot produce a high titer of ecdysone. Finally we demonstrate that S2 cells transfected with Cyp306a1 convert ketodiol to ketotriol via carbon 25 hydroxylation. These results strongly suggest that CYP306A1 functions as a carbon 25 hydroxylase and has an essential role in ecdysteroid biosynthesis during insect development.