Base-excision repair and control of nucleotide pools safe-guard against permanent uracil accumulation in DNA relying on two key enzymes: uracil-DNA glycosylase and dUTPase. Lack of the major uracil-DNA glycosylase UNG gene from the fruit fly genome and dUTPase from fruit fly larvae prompted the hypotheses that i) uracil may accumulate in Drosophila genomic DNA where it may be well tolerated, and ii) this accumulation may affect development. Here we show that i) Drosophila melanogaster tolerates high levels of uracil in DNA; ii) such DNA is correctly interpreted in cell culture and embryo; and iii) under physiological spatio-temporal control, DNA from fruit fly larvae, pupae, and imago contain greatly elevated levels of uracil (200-2,000 uracil/million bases, quantified using a novel real-time PCR-based assay). Uracil is accumulated in genomic DNA of larval tissues during larval development, whereas DNA from imaginal tissues contains much less uracil. Upon pupation and metamorphosis, uracil content in DNA is significantly decreased. We propose that the observed developmental pattern of uracil-DNA is due to the lack of the key repair enzyme UNG from the Drosophila genome together with down-regulation of dUTPase in larval tissues. In agreement, we show that dUTPase silencing increases the uracil content in DNA of imaginal tissues and induces strong lethality at the early pupal stages, indicating that tolerance of highly uracil-substituted DNA is also stage-specific. Silencing of dUTPase perturbs the physiological pattern of uracil-DNA accumulation in Drosophila and leads to a strongly lethal phenotype in early pupal stages. These findings suggest a novel role of uracil-containing DNA in Drosophila development and metamorphosis and present a novel example for developmental effects of dUTPase silencing in multicellular eukaryotes. Importantly, we also show lack of the UNG gene in all available genomes of other Holometabola insects, indicating a potentially general tolerance and developmental role of uracil-DNA in this evolutionary clade.