Organogenesis requires coordination between developmental specific regulators and genes governing cell proliferation. Here we show that Drosophila prospero encodes a critical regulator of the transition from mitotically active cells to terminal differentiated neurons. Loss of pros results in aberrant expression of multiple cell-cycle regulatory genes and ectopic mitotic activity. In contrast, ectopic pros expression causes transcriptional suppression of multiple cell-cycle regulatory genes and premature termination of cell division. pros activity, hence, provides a critical regulatory link between neuronal lineage development and transcriptional regulation of cell cycle regulatory genes.