Many organisms, including cosmopolitan drosophilids, show circadian plasticity, varying their activity with changing dawn-dusk intervals ¹ . How this behaviour evolves is unclear. Here we compare Drosophila melanogaster with Drosophila sechellia, an equatorial, ecological specialist that experiences minimal photoperiod variation, to investigate the mechanistic basis of circadian plasticity evolution ² . D. sechellia has lost the ability to delay its evening activity peak time under long photoperiods. Screening of circadian mutants in D. melanogaster/D. sechellia hybrids identifies a contribution of the neuropeptide pigment-dispersing factor (Pdf) to this loss. Pdf exhibits species-specific temporal expression, due in part to cis-regulatory divergence. RNA interference and rescue experiments in D. melanogaster using species-specific Pdf regulatory sequences demonstrate that modulation of this neuropeptide's expression affects the degree of behavioural plasticity. The Pdf regulatory region exhibits signals of selection in D. sechellia and across populations of D. melanogaster from different latitudes. We provide evidence that plasticity confers a selective advantage for D. melanogaster at elevated latitude, whereas D. sechellia probably suffers fitness costs through reduced copulation success outside its range. Our findings highlight this neuropeptide gene as a hotspot locus for circadian plasticity evolution that might have contributed to both D. melanogaster's global distribution and D. sechellia's specialization.