The transcription factors Glial cells missing (Gcm) and Gcm2 are known to play a crucial role in promoting glial-cell differentiation during Drosophila embryogenesis. Our findings reveal a central function for gcm genes in regulating neuronal development in the postembryonic visual system. We demonstrate that Gcm and Gcm2 are expressed in both glial and neuronal precursors within the optic lobe. Removal of gcm and gcm2 function shows that the two genes act redundantly and are required for the formation of a subset of glial cells. They also cell-autonomously control the differentiation and proliferation of specific neurons. We show that the transcriptional regulator Dachshund acts downstream of gcm genes and is required to make lamina precursor cells and lamina neurons competent for neuronal differentiation through regulation of epidermal growth factor receptor levels. Our findings further suggest that gcm genes regulate neurogenesis through collaboration with the Hedgehog-signaling pathway.