Recent studies using high-throughput sequencing protocols have uncovered the complexity of mammalian transcription by RNA polymerase II, helping to define several initiation patterns in which transcription start sites (TSSs) cluster in both narrow and broad genomic windows. Here we describe a paired-end sequencing strategy, which enables more robust mapping and characterization of capped transcripts. We used this strategy to explore the transcription initiation landscape in the Drosophila melanogaster embryo. Extending the previous findings in mammals, we found that fly promoters exhibited distinct initiation patterns, which were linked to specific promoter sequence motifs. Furthermore, we identified many 5' capped transcripts originating from coding exons; our analyses support that they are unlikely the result of alternative TSSs, but rather the product of post-transcriptional modifications. We demonstrated paired-end TSS analysis to be a powerful method to uncover the transcriptional complexity of eukaryotic genomes.