During development, the rate of cell proliferation must be constantly monitored so that an individual tissue achieves its correct size. Mutations in genes that normally promote tissue growth often result in undersized, disorganized and non-functional organs. However, mutations in genes that encode growth inhibitors can trigger the onset of tumorigenesis and cancer. The developing eye of the fruit fly, Drosophila melanogaster, has become a premier model system for studies that are focused on identifying the molecular mechanisms that underpin growth control. Here, we examine the mechanism by which the Notch pathway, a major contributor to growth, promotes cell proliferation in the developing eye. Current models propose that the Notch pathway directly influences cell proliferation by regulating growth-promoting genes such as four-jointed, cyclin D1 and E2f1. Here, we show that, in addition to these mechanisms, some Notch signaling is devoted to blocking the growth-suppressing activity of the bHLH DNA-binding protein Daughterless (Da). We demonstrate that Notch signaling activates the expression of extramacrochaetae (emc), which encodes a helix-loop-helix (HLH) transcription factor. Emc, in turn, then forms a biochemical complex with Da. As Emc lacks a basic DNA-binding domain, the Emc-Da heterodimer cannot bind to and regulate genomic targets. One effect of Da sequestration is to relieve the repression on growth. Here, we present data supporting our model that Notch-induced cell proliferation in the developing eye is mediated in part by the activity of Emc.