The fundamental question of developmental biology is how a single cell can generate a multicellular organism with a diverse set of cell types with specialized functions. A classic example of this paradigm is how the mesodermal germ layer of metazoan species can give rise to a range of cell types, including cells that form muscle, bone, blood, kidneys and the heart in vertebrate organisms. In my dissertation, I have used the C. elegans postembryonic mesoderm as a model to study the mechanisms of how various cell fates can be specified from the mesoderm. The C. elegans postembryonic mesoderm, or the M lineage, gives rise to a small, but diverse, set of cell types that include striated body wall muscles (BWMs), non-muscle cells of a scavanger-like function known as coelomocytes (CCs), and sex myoblasts (SMs), which further divide and generate the non-striated sex muscles used for egg-laying. My project began with the characterization of the gene fozi-1, which was identified in a screen for M lineage mutant phenotypes. fozi-1 encodes a unique transcription factor that functions autonomously in the M lineage for the proper specification of BWMs and CCs. Moreover, fozi-1 functions redundantly with the MyoD homolog hlh-1 and the Hox gene mab-5 to specify the myogenic BWM fate. In an RNAi screen to search for additional factors required for M lineage development, I identified 37 transcription factors that are required for proper M lineage development. I have focused my studies on one of these genes, ceh-34, which encodes a homeodomain protein that is conserved among metazoans. I found that CEH-34 and its cofactor EYA-1 are individually required for the CC fate and together can induce the specification of CC fates from cells that will normally become BWMs. I present evidence for the regulation of ceh-34 and eya-1 by the transcription factors fozi-1, hlh-1 and mab-5, along with well-conserved signaling mechanisms that regulate dorsal-ventral (TGF-Beta and Notch) and anterior-posterior (Wnt) asymmetry within the M lineage to specify non-muscle fates. Many of the components functioning in the M lineage are conserved in metazoans, and similar paradigms have also been found in Drosophila mesodermal fate specification, suggesting that the mechanism for distinguishing non-myogenic and myogenic fates in the mesoderm is conserved in other animals.