This chapter presents a genetic theory of homology that addresses the most challenging problem when attempting to explain character identity; namely, unquestionable homologies (that is, character identities across species) are often associated with extensive variations in the developmental pathways and mechanisms that produce these characters. To resolve this problem, the chapter reviews some of the relevant facts from developmental genetics and then proposes a model that explains these patterns and serves as a guide for further research into the developmental evolution of morphological characters. It shows that the function of homeotic genes offers insights into what might be the developmental genetic basis of character identity. It argues that the distinction between character identity and character states is reflected in the genetic architecture of development in which character identity has a different genetic substrate than character states. This approach leads to the concept of character identity networks.