Gene expression variation is pervasive across all levels of organismal organization, including development. Few studies, however, have examined variation in developmental transcriptional dynamics among populations, or how it contributes to phenotypic divergence. Indeed, the evolution of gene expression dynamics when both the evolutionary and temporal timescale are comparatively short remains relatively uncharacterized. Here, we examined coding and non-coding gene expression in the fat body of an ancestral African and a derived EuropeanDrosophila melanogasterpopulation across three developmental stages spanning ten hours of larval development. Between populations, expression divergence was largely stage-specific. We detected higher expression variation during the late wandering stage, which may be a general feature of this stage. During this stage, we also detected higher and more extensive lncRNA expression in Europe, suggesting that lncRNA expression may be more important in derived populations. Interestingly, the temporal breadth of protein-coding and lncRNA expression became more restricted in the derived population. Taken together with the signatures of potential local adaptation that we detected at the sequence level in 9–25% of candidate genes (those showing evidence of expression divergence between populations), this finding suggests that gene expression becomes more developmental stage-specific during adaptation to new environments. We further used RNAi to identify several candidate genes that likely contribute to known phenotypic divergence between these populations. Our results shed light on the evolution and dynamics of expression variation over short developmental and evolutionary timescales, and how this variation contributes to population and phenotypic divergence.