A nuclear concentration gradient of the maternal transcription factor Dorsal establishes three tissues across the dorsal-ventral axis of precellular Drosophila embryos: mesoderm, neuroectoderm, and dorsal ectoderm. Subsequent interactions among Dorsal target genes subdivide the mesoderm and dorsal ectoderm. Here we investigate the subdivision of the neuroectoderm by three conserved homeobox genes, ventral nervous system defective (vnd), intermediate neuroblasts defective (ind), and muscle segment homeobox (msh). These genes divide the ventral nerve cord into three columns along the dorsal-ventral axis. Sequential patterns of vnd, ind, and msh expression are established prior to gastrulation and evidence is presented that these genes respond to distinct thresholds of the Dorsal gradient. Maintenance of these patterns depends on cross-regulatory interactions, whereby genes expressed in ventral regions repress those expressed in more dorsal regions. This "ventral dominance" includes regulatory genes that are expressed in the mesectoderm and mesoderm. At least some of these regulatory interactions are direct. For example, the misexpression of vnd in transgenic embryos represses ind and msh, and the addition of Vnd binding sites to a heterologous enhancer is sufficient to mediate repression. The N-terminal domain of Vnd contains a putative eh1 repression domain that binds Groucho in vitro. Mutations in this domain diminish Groucho binding and also attenuate repression in vivo. We discuss the significance of ventral dominance with respect to the patterning of the vertebrate neural tube, and compare it with the previously observed phenomenon of posterior prevalence, which governs sequential patterns of Hox gene expression across the anterior-posterior axis of metazoan embryos.