We report the embryonic phenotype of muscleblind (mbl), a recently described Drosophila gene involved in terminal differentiation of adult ommatidia. mbl is a nuclear protein expressed late in the embryo in pharyngeal, visceral, and somatic muscles, the ventral nerve cord, and the larval photoreceptor system. All three mbl alleles studied exhibit a lethal phenotype and die as stage 17 embryos or first instar larvae. These larvae are partially paralyzed, show a characteristically contracted abdomen, and lack striation of muscles. Our analysis of the somatic musculature shows that the pattern of muscles is established correctly, and they form morphologically normal synapses. Ultrastructural analysis, however, reveals two defects in the terminal differentiation of the muscles: inability to differentiate Z-bands in the sarcomeric apparatus and reduction of extracellular tendon matrix at attachment sites to the epidermis. Failure to differentiate both structures could explain the partial paralysis and contracted abdomen phenotype. Analysis of mbl expression in embryos that are either mutant for Dmef2 or ectopically express Dmef2 places mbl downstream of Dmef2 function in the myogenic differentiation program. mbl, therefore, may act as a critical element in the execution of two Dmef2-dependent processes in the terminal differentiation of muscles.