Fat facets is a deubiquitinating enzyme required in a cell communication pathway that limits to eight the number of photoreceptor cells in each facet of the Drososphila compound eye. Genetic data support a model whereby Faf removes ubiquitin, a polypeptide tag for protein degradation, from a specific ubiquitinated protein thus preventing its degradation. Here, mutations in the liquid facets gene were identified as dominant enhancers of the fat facets mutant eye phenotype. The liquid facets locus encodes epsin, a vertebrate protein associated with the clathrin endocytosis complex. The results of genetic experiments reveal that fat facets and liquid facets facilitate endocytosis and function in common cells to generate an inhibitory signal that prevents ectopic photoreceptor determination. Moreover, it is demonstrated that the fat facets mutant phenotype is extraordinarily sensitive to the level of liquid facets expression. We propose that Liquid facets is a candidate for the critical substrate of Fat facets in the eye.