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Animal color patterns can affect fitness in the wild; however, little is known about the mechanisms that control their formation and subsequent evolution. We took advantage of two locally camouflaged populations of Peromyscus mice to show that the negative regulator of adult pigmentation, Agouti, also plays a key developmental role in color pattern evolution. Genetic and functional analyses showed that ventral-specific embryonic expression of Agouti establishes a prepattern by delaying the terminal differentiation of ventral melanocytes. Moreover, a skin-specific increase in both the level and spatial domain of Agouti expression prevents melanocyte maturation in a regionalized manner, resulting in a novel and adaptive color pattern. Thus, natural selection favors late-acting, tissue-specific changes in embryonic Agouti expression to produce large changes in adult color pattern.