The cell cycle is coordinated with differentiation during animal development. Here we report a cell-cycle-independent developmental role for a master cell-cycle regulator, the anaphase-promoting complex or cyclosome (APC/C), in the regulation of cell fate through modulation of Wingless (Wg) signaling. The APC/C controls both cell-cycle progression and postmitotic processes through ubiquitin-dependent proteolysis. Through an RNAi screen in the developing Drosophila eye, we found that partial APC/C inactivation severely inhibits retinal differentiation independently of cell-cycle defects. The differentiation inhibition coincides with hyperactivation of Wg signaling caused by the accumulation of a Wg modulator, Drosophila Nek2 (dNek2). The APC/C degrades dNek2 upon synchronous G1 arrest prior to differentiation, which allows retinal differentiation through local suppression of Wg signaling. We also provide evidence that decapentaplegic signaling may posttranslationally regulate this APC/C function. Thus, the APC/C coordinates cell-fate determination with the cell cycle through the modulation of developmental signaling pathways.