The neural circuits that regulate sleep and arousal as well as their integration with circadian circuits remain unclear, especially in Drosophila. This issue intersects with that of photoreception, because light is both an arousal signal in diurnal animals and an entraining signal for the circadian clock. To identify neurons and circuits relevant to light-mediated arousal as well as circadian phase-shifting, we developed genetic techniques that link behavior to single cell-type resolution within the Drosophila central brain. We focused on the unknown function of the 10 PDF-containing large ventral lateral neurons (l-LNvs) of the Drosophila circadian brain network and show here that these cells function in light-dependent arousal. They also are important for phase shifting in the late-night (dawn), indicating that the circadian photoresponse is a network property and therefore non-cell-autonomous. The data further indicate that the circuits underlying light-induced arousal and circadian photoentrainment intersect at the l-LNvs and then segregate.