Understanding the early evolution of animal body plans requires knowledge both of metazoan phylogeny and of the genetic and developmental changes involved in the emergence of particular forms. Recent 18S ribosomal RNA phylogenies suggest a three-branched tree for the Bilateria comprising the deuterostomes and two great protostome clades, the lophotrochozoans and ecdysozoans. Here, we show that the complement of Hox genes in critical protostome phyla reflects these phylogenetic relationships and reveals the early evolution of developmental regulatory potential in bilaterians. We have identified Hox genes that are shared by subsets of protostome phyla. These include a diverged pair of posterior (Abdominal-B -like) genes in both a brachiopod and a polychaete annelid, which supports the lophotrochozoan assemblage, and a distinct posterior Hox gene shared by a priapulid, a nematode and the arthropods, which supports the ecdysozoan clade. The ancestors of each of these two major protostome lineages had a minimum of eight to ten Hox genes. The major period of Hox gene expansion and diversification thus occurred before the radiation of each of the three great bilaterian clades.