In Drosophila, neurons and glial cells are produced by neural precursor cells called neuroblasts (NBs), which can be individually identified. Each NB generates a characteristic cell lineage specified by a precise spatiotemporal control of gene expression within the NB and its progeny. Here we show that the homeobox genes ladybird early and ladybird late are expressed in subsets of cells deriving from neuroblasts NB 5-3 and NB 5-6 and are essential for their correct development. Our analysis revealed that ladybird in Drosophila, like their vertebrate orthologous Lbx1 genes, play an important role in cell fate specification processes. Among those cells that express ladybird are NB 5-6-derived glial cells. In ladybird loss-of-function mutants, the NB 5-6-derived exit glial cells are absent while overexpression of these genes leads to supernumerary glial cells of this type. Furthermore, aberrant glial cell positioning and aberrant spacing of axonal fascicles in the nerve roots observed in embryos with altered ladybird function suggest that the ladybird genes might also control directed cell movements and cell-cell interactions within the developing Drosophila ventral nerve cord.