The study of achaete-scute (ac/sc) genes has recently become a paradigm to understand the evolution and development of the arthropod nervous system. We describe the identification and characterization of the ac/sc genes in the coleopteran insect species Tribolium castaneum. We have identified two Tribolium ac/sc genes - achaete-scute homolog (Tc-ASH) a proneural gene and asense (Tc-ase) a neural precursor gene that reside in a gene complex. Focusing on the embryonic central nervous system we find that Tc-ASH is expressed in all neural precursors and the proneural clusters from which they segregate. Through RNAi and misexpression studies we show that Tc-ASH is necessary for neural precursor formation in Tribolium and sufficient for neural precursor formation in Drosophila. Comparison of the function of the Drosophila and Tribolium proneural ac/sc genes suggests that in the Drosophila lineage these genes have maintained their ancestral function in neural precursor formation and have acquired a new role in the fate specification of individual neural precursors. Furthermore, we find that Tc-ase is expressed in all neural precursors suggesting an important and conserved role for asense genes in insect nervous system development. Our analysis of the Tribolium ac/sc genes indicates significant plasticity in gene number, expression and function, and implicates these modifications in the evolution of arthropod neural development.