Drosophila retinal axons trigger both the proliferation of their targets, the lamina neurons, as well as the final differentiation and migration of the lamina glia. To date, the molecular basis of these interactions has remained unclear. We have identified a new gene, lamina ancestor (lama). Both the lamina's neural and glial progenitors express lama, even though these cells have very different developmental origins. Expression of lama is down-regulated once the precursors begin their differentiation programs. Loss of function mutants are viable and fertile, and appear to have normally developed visual systems. lama encodes a novel protein that is 74% identical to its D. virilis homologue.