The Drosophila body organizer Bicoid (Bcd) is a maternal homeodomain protein. It forms a concentration gradient along the longitudinal axis of the preblastoderm embryo and activates early zygotic segmentation genes in a threshold-dependent fashion. In addition, Bcd acts as a translational repressor of maternal caudal (cad) mRNA in the anterior region of the embryo. This process involves a distinct Bcd-binding region (BBR) in the 3' untranslated region (UTR) of cad mRNA. Using cotransfection assays, we found that Bcd represses translation in a cap-dependent manner. Bcd-dependent translational repression involves a portion of the PEST motif of Bcd, a conserved protein motif best known for its function in protein degradation. Rescue experiments with Bcd-deficient embryos expressing transgene-derived Bcd mutants indicate that amino acid replacements within the C-terminal portion of the PEST motif prevent translational repression of cad mRNA but allow for Bcd-dependent transcriptional activation. Thus, Bcd contains separable protein domains for transcriptional and translational regulation of target genes. Maternally-derived cad protein in the anterior region of embryos interferes with head morphogenesis, showing that cad mRNA suppression by Bcd is an important control event during early Drosophila embryogenesis.