Dan forms condensates in neuroblasts and regulates nuclear architecture and progenitor competence in vivo.

Genome organization is thought to underlie cell type specific gene expression, yet how it is regulated in progenitors to produce cellular diversity is unknown. In Drosophila, a developmentally-timed genome reorganization in neural progenitors terminates competence to produce early-born neurons. These events require downregulation of Distal antenna (Dan), part of the conserved pipsqueak DNA-binding superfamily. Here we find that Dan forms liquid-like condensates with high protein mobility, and whose size and subnuclear distribution are balanced with its DNA-binding. Further, we identify a LARKS domain, a structural motif associated with condensate-forming proteins. Deleting just 13 amino acids from LARKS abrogates Dan's ability to retain the early-born neural fate gene, hunchback, in the neuroblast nuclear interior and maintain competence in vivo. Conversely, domain-swapping with LARKS from known phase-separating proteins rescues Dan's effects on competence. Together, we provide in vivo evidence for condensate formation and the regulation of progenitor nuclear architecture underlying neuronal diversification.