General mechanisms by which Hox genes establish cell fates are known. However, a few Hox effectors mediating cell behaviors have been identified. Here we found the first effector of LIN-39/HoxD4/Dfd in Caenorhabditis elegans . In specific vulval precursor cells (VPCs), LIN-39 represses early and late expression of EFF-1, a membrane protein essential for cell fusion. Repression of eff-1 is also achieved by the activity of CEH-20/Exd/Pbx, a known cofactor of Hox proteins. Unfused VPCs in lin-39(−);eff-1(−) double mutants fail to divide but migrate, executing vulval fates. Thus, lin-39 is essential for inhibition of EFF-1-dependent cell fusion and stimulation of cell proliferation during vulva formation. Supplemental material is available at http://www.genesdev.org .