We used targeted gene inactivation to analyze the function of a Caenorhabditis elegans POU gene, ceh-18, and to dissect its functional domains in vivo. In ceh-18 mutants, oocytes exhibit an incompletely penetrant failure to arrest in diakinesis of meiotic prophase I and instead undergo multiple rounds of DNA replication without cytokinesis. ceh-18 is expressed in the gonadal sheath cells that signal the oocyte, but not in the oocyte. This suggests that ceh-18 affects, directly or indirectly, a sheath cell signal that causes oocytes to maintain diakinesis arrest. ceh-18 also participates in directing gonad migration and in specifying the differentiated phenotypes of epidermal cells during postembryonic development. Analysis of targeted deletions that disrupt half of the POU domain selectively by deleting either the POUhd or the POUsp alone, indicates that each CEH-18 POU subdomain is sufficient for partial activity in vivo.