In Drosophila, there are two timeless paralogs, timeless1 (tim1) and timeless2 (tim2, or timeout). Phylogenetic analyses suggest that tim1 originated as a duplication of tim2 around the time of the Cambrian explosion. The function of tim1 as a canonical circadian component is well established, but the role of tim2 in the fly is poorly understood. Many organisms possess a single tim2-like gene that has been implicated in DNA synthesis and, in the case of mammals, somewhat controversially, in circadian rhythmicity. Here we analyze the structure and the functional role of fly tim2. tim2 is a large locus (approximately 75 kb) that harbors several transcribed intronic sequences. Using insertional mutations and tissue-specific RNA interference-mediated downregulation, we find that tim2 is an essential gene required for normal DNA metabolism and chromosome integrity. Moreover, tim2 is involved in light entrainment of the adult circadian clock, via its expression in the T1 basket cells of the optic lobes. tim2's residual role in light entrainment thus provides an evolutionary link that may explain why its derived paralog, tim1, came to play such a major role in both circadian photosensitivity and core clock function.