A substantial proportion of eukaryotic transcripts are considered to be noncoding RNAs because they contain only short open reading frames (sORFs). Recent findings suggest, however, that some sORFs encode small bioactive peptides. Here, we show that peptides of 11 to 32 amino acids encoded by the polished rice (pri) sORF gene control epidermal differentiation in Drosophila by modifying the transcription factor Shavenbaby (Svb). Pri peptides trigger the amino-terminal truncation of the Svb protein, which converts Svb from a repressor to an activator. Our results demonstrate that during Drosophila embryogenesis, Pri sORF peptides provide a strict temporal control to the transcriptional program of epidermal morphogenesis.