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The number of adult myofibers in Drosophila is determined by the number of founder myoblasts selected from a myoblast pool, a process governed by fibroblast growth factor (FGF) signaling. Here, we show that loss of cabeza (caz) function results in a reduced number of adult founder myoblasts, leading to a reduced number and misorientation of adult dorsal abdominal muscles. Genetic experiments revealed that loss of caz function in both adult myoblasts and neurons contributes to caz mutant muscle phenotypes. Selective overexpression of the FGF receptor Htl or the FGF receptor-specific signaling molecule Stumps in adult myoblasts partially rescued caz mutant muscle phenotypes, and Stumps levels were reduced in caz mutant founder myoblasts, indicating FGF pathway deregulation. In both adult myoblasts and neurons, caz mutant muscle phenotypes were mediated by increased expression levels of Xrp1, a DNA-binding protein involved in gene expression regulation. Xrp1-induced phenotypes were dependent on the DNA-binding capacity of its AT-hook motif, and increased Xrp1 levels in founder myoblasts reduced Stumps expression. Thus, control of Xrp1 expression by Caz is required for regulation of Stumps expression in founder myoblasts, resulting in correct founder myoblast selection. Author summary: Skeletal muscles mediate movement, and therefore, proper structure and function of skeletal muscles is required for respiration, locomotion, and posture. Adult muscles arise from fusion of muscle precursor cells during development. In the fruit fly Drosophila melanogaster, muscle precursor cells come in two flavors: founder cells and fusion-competent cells. The number of founder cells selected during development corresponds to the number of adult muscles formed. Here, we report that inactivation of the Drosophila caz gene results in muscle developmental defects. Loss of caz function in both muscle precursor cells and the nerve cells that innervate muscles contributes to the muscle developmental defect. At the molecular level, loss of caz function leads to increased levels of Xrp1. Xrp1 regulates the expression of many other genes, including genes that produce components of the FGF signaling pathway, which is known to be involved in founder cell selection. In all, we uncovered a novel molecular mechanism that regulates founder cell selection during muscle development. [ABSTRACT FROM AUTHOR]