The first cells specified during CNS development of vertebrates and invertebrates are the cells located at the midline of the neuroepithelium. In Drosophila the development of these cells requires inductive signals from the mesoderm. Later in CNS development, the midline cells are in turn influencing the flanking neuroectoderm, contributing to the establishment of dorsoventral positional information. During axonal pattern formation the midline cells are required in guiding commissural growth cones towards and across the midline. The midline consists of only few, easily identifiable neuronal and glial cells per segment. The development of midline glial cells is relatively well understood. Their differentiation appears to be controlled by the concomitant expression of two different sets of transcription factors. Activation of glial differentiation mediated by the ETS transcription factor encoded by pointed (whose activity depends on EGF-receptor signalling) occurs in concert with repression of neuronal differentiation mediated by the Zn-finger transcription factor encoded by tramtrack.