Characterization of the basal transcription machinery of mitochondrial DNA (mtDNA) is critical to understand mitochondrial pathophysiology. In mammalian in vitro systems, mtDNA transcription requires mtRNA polymerase, transcription factor A (TFAM), and either transcription factor B1 (TFB1M) or B2 (TFB2M). We have silenced the expression of TFB2M by RNA interference in Drosophila melanogaster. RNA interference knockdown of TF2BM causes lethality by arrest of larval development. Molecular analysis demonstrates that TF2BM is essential for mtDNA transcription during Drosophila development and is not redundant with TFB1M. The impairment of mtDNA transcription causes a dramatic decrease in oxidative phosphorylation and mitochondrial ATP synthesis in the long-lived larvae, and a metabolic shift to glycolysis, which partially restores ATP levels and elicits a compensatory response at the nuclear level that increases mitochondrial mass. At the cellular level, the mitochondrial dysfunction induced by TFB2M knockdown causes a severe reduction in cell proliferation without affecting cell growth, and increases the level of apoptosis. In contrast, cell differentiation and morphogenesis are largely unaffected. Our data demonstrate the essential role of TFB2M in mtDNA transcription in a multicellular organism, and reveal the complex cellular, biochemical, and molecular responses induced by impairment of oxidative phosphorylation during Drosophila development.