scarecrow (scro) gene encodes a Drosophila homolog of mammalian Nkx2.1 that belongs to an evolutionally conserved NK2 family. Nkx2.1 has been well known for its role in the development of hypothalamus, lung, thyroid gland, and brain. However, little is known about biological roles of scro. To understand scro functions, we generated two types of knock-in mutant alleles, substituting part of either exon-2 or exon-3 for EGFP (or Gal4) by employing the CRISPR/Cas9 genome editing tool. Using these mutations, we characterized spatio-temporal expression patterns of the scro gene and its mutant phenotypes. Homozygous knock-in mutants are lethal during embryonic and early larval development. In developing embryos, scro is exclusively expressed in the pharyngeal primordia and numerous neural clusters in the central nervous system (CNS). In postembryonic stages, the most prominent scro expression is detected in the larval and adult optic lobes, suggesting that scro plays a role for the development and/or function of this tissue type. Notch signaling is the earliest factor known to act for the development of the optic lobe. scro mutants lacked mitotic cells and Delta expression in the optic anlagen, and showed altered expression of several proneural and neurogenic genes including Delta and Notch. Furthermore, scro mutants showed grossly deformed neuroepithelial (NE) cells in the developing optic lobe and severely malformed adult optic lobes, the phenotypes of which are shown in Notch or Delta mutants, suggesting scro acting epistatic to the Notch signaling. From these data together, we propose that scro plays an essential role for the development of the optic lobe, possibly acting as a regional specification factor.