The accurate control of cell proliferation and survival is critical for animal development. The Hippo tumor suppressor pathway regulates both of these parameters by controlling the nuclear availability of the transcriptional coactivator Yorkie (Yki), which regulates downstream target genes together with Scalloped (Sd), a DNA-binding protein. Here we provide evidence that Yki can also regulate target genes in conjunction with Homothorax (Hth) and Teashirt (Tsh), two DNA-binding transcription factors expressed in the uncommitted progenitor cells of the Drosophila eye imaginal disc. Clonal analyses demonstrate that Hth and Tsh promote cell proliferation and protect eye progenitor cells from apoptosis. Genetic epistasis experiments suggest that Hth and Tsh execute these functions with Yki, in part by up-regulating the microRNA bantam. A physical interaction between Hth and Yki can be detected in cell culture, and we show that Hth and Yki are bound to a DNA sequence approximately 14 kb upstream of the bantam hairpin in eye imaginal disc cells, arguing that this regulation is direct. These data suggest that the Hippo pathway uses different DNA-binding transcription factors depending on the cellular context. In the eye disc, Hth and Tsh provide spatial information to this pathway, promoting cell proliferation and survival in the progenitor domain.