In Drosophila, the development of the compound eye depends on the movement of a morphogenetic furrow (MF) from the posterior (P) to the anterior (A) of the eye imaginal disc. We define several subdomains along the A–P axis of the eye disc that express distinct combinations of transcription factors. One subdomain, anterior to the MF, expresses two homeobox genes, eyeless (ey) andhomothorax (hth), and the zinc-finger geneteashirt (tsh). We provide evidence that this combination of transcription factors may function as a complex and that it plays at least two roles in eye development: it blocks the expression of later-acting transcription factors in the eye development cascade, and it promotes cell proliferation. A key step in the transition from an immature proliferative state to a committed state in eye development is the repression of hth by the BMP-4 homolog Decapentaplegic (Dpp).