In Drosophila lateral glial cell development is initiated by the transcription factor encoded by glial cells missing. glial cells missing activates downstream transcription factors such as repo and pointed which subsequently control terminal glial differentiation. The gene loco has been identified as a potential target gene of pointed and is involved in terminal glial differentiation. It encodes an RGS domain protein expressed specifically by the lateral glial cells in the developing embryonic CNS. Here we analyzed the loco promoter and the control of the glial-specific transcription pattern. Using promoter–reporter gene fusions we identified a 1.9 kb promoter element capable of directing the almost complete loco gene expression pattern. Sequence analysis suggested the presence of gcm and pointed DNA binding sites. Following in vitro mutagenesis of these sites we demonstrated their relevance in vivo. The expression of loco is initially dependent on gcm. During subsequent stages of embryonic development gcm and pointed appear to activate loco transcription synergistically. In addition, at least two other factors appear to repress loco expression in the ectoderm and in the CNS midline cells.