Development of the Drosophila retina occurs asynchronously; differentiation, its front marked by the morphogenetic furrow, progresses across the eye disc epithelium over a 2 day period. We have investigated the mechanism by which this front advances, and our results suggest that developing retinal cells drive the progression of morphogenesis utilizing the products of the hedgehog (hh) and decapentaplegic (dpp) genes. Analysis of hh and dpp genetic mosaics indicates that the products of these genes act as diffusible signals in this process. Expression of dpp in the morphogenetic furrow is closely correlated with the progression of the furrow under a variety of conditions. We show that hh, synthesized by differentiating cells, induces the expression of dpp, which appears to be a primary mediator of furrow movement.