Studies of the onset of metamorphosis have identified an ecdysone-triggered transcriptional cascade that consists of the sequential expression of the transcription-factor-encoding genes DHR3, βFTZ-F1, E74A and E75A. Although the regulatory interactions between these genes have been well characterized by genetic and molecular studies over the past 20 years, their developmental functions have remained more poorly understood. In addition, a transcriptional sequence similar to that observed in prepupae is repeated before each developmental transition in the life cycle, including mid-embryogenesis and the larval molts. Whether the regulatory interactions between DHR3, βFTZ-F1, E74A and E75A at these earlier stages are similar to those defined at the onset of metamorphosis, however, is unknown. In this study, we turn to embryonic development to address these two issues. We show that mid-embryonic expression of DHR3 and βFTZ-F1 is part of a 20-hydroxyecdysone (20E)-triggered transcriptional cascade similar to that seen in mid-prepupae, directing maximal expression of E74A and E75A during late embryogenesis. In addition, DHR3 and βFTZ-F1 exert overlapping developmental functions at the end of embryogenesis. Both genes are required for tracheal air filling, whereas DHR3 is required for ventral nerve cord condensation and βFTZ-F1 is required for proper maturation of the cuticular denticles. Rescue experiments support these observations, indicating that DHR3 has essential functions independent from those of βFTZ-F1. DHR3 and βFTZ-F1 also contribute to overlapping transcriptional responses during embryogenesis. Taken together, these studies define the lethal phenotypes of DHR3 and βFTZ-F1 mutants, and provide evidence for functional bifurcation in the 20E-responsive transcriptional cascade.