Signaling pathways are reused for multiple purposes in plant and animal development. The Hippo pathway in mammals and Drosophila coordinates proliferation and apoptosis via the coactivator and oncoprotein YAP/Yorkie (Yki), which is homeostatically regulated through negative feedback. In the Drosophila eye, cross-repression between the Hippo pathway kinase LATS/Warts (Wts) and growth regulator Melted generates mutually exclusive photoreceptor subtypes. Here, we show that this all-or-nothing neuronal differentiation results from Hippo pathway positive feedback: Yki both represses its negative regulator, warts, and promotes its positive regulator, melted. This postmitotic Hippo network behavior relies on a tissue-restricted transcription factor network-including a conserved Otx/Orthodenticle-Nrl/Traffic Jam feedforward module-that allows Warts-Yki-Melted to operate as a bistable switch. Altering feedback architecture provides an efficient mechanism to co-opt conserved signaling networks for diverse purposes in development and evolution.