During organ development, the progenitor state is transient, and depends on specific combinations of transcription factors and extracellular signals. Not surprisingly, abnormal maintenance of progenitor transcription factors may lead to tissue overgrowth, and the concurrence of signals from the local environment is often critical to trigger this overgrowth. Therefore, identifying specific combinations of transcription factors/signals promoting -or opposing- proliferation in progenitors is essential to understand normal development and disease. We have investigated this issue using the Drosophila eye as model. Transcription factors hth and tsh are transiently expressed in eye progenitors causing the expansion of the progenitor pool. However, if their co-expression is maintained experimentally, cell proliferation continues and differentiation is halted. Here we show that Hth+Tsh-induced tissue overgrowth requires the BMP2 Dpp and the abnormal hyperactivation of its pathway. Rather than using autocrine Dpp expression, Hth+Tsh cells increase their avidity for Dpp, produced locally, by upregulating extracellular matrix components. During normal development, Dpp represses hth and tsh ensuring that the progenitor state is transient. However, cells in which Hth+Tsh expression is forcibly maintained use Dpp to enhance their proliferation.