The development of the epidermis of Caenorhabditis elegans involves cell fusion, migration, and differentiation events. To understand the mechanisms underlying these processes, we characterized the roles of NHR-25, a member of the nuclear receptor family of transcription factors. The NHR-25 homologs Ftz-F1 in Drosophila and SF-1 in mammals are involved in various biological processes, including regulation of patterning during development, reproduction, metabolism, metamorphosis, and homeostasis. Impairment of nhr-25 activity leads to severe phenotypes in embryos and many postembryonic tissues. Further analysis has indicated that nhr-25 activity is required for the proper development, including cell-cell fusion, of several epidermal cell types, such as the epidermal syncytial, seam, and Pn.p cells. Our results also suggest that nhr-25 is likely to regulate cell-cell junctions and/or fusion. In a subset of Pn.p cells, called vulval precursor cells, nhr-25 acts collaboratively with the lin-39 Hox gene in regulating vulval cell differentiation. Additionally, our data suggest that nhr-25 may also function with another Hox gene, nob-1, during embryogenesis. Overall, our results indicate that nhr-25 plays an integral role in regulating cellular processes of epidermal cells.