Coordination of cell proliferation and differentiation is crucial for tissue formation, repair and regeneration. Some tissues, such as skin and blood, depend on differentiation of a pluripotent stem cell population, whereas others depend on the division of differentiated cells. In development and in the hair follicle, pigmented melanocytes are derived from undifferentiated precursor cells or stem cells. However, differentiated melanocytes may also have proliferative capacity in animals, and the potential for differentiated melanocyte cell division in development and regeneration remains largely unexplored. Here, we use time-lapse imaging of the developing zebrafish to show that while most melanocytes arise from undifferentiated precursor cells, an unexpected subpopulation of differentiated melanocytes arises by cell division. Depletion of the overall melanocyte population triggers a regeneration phase in which differentiated melanocyte division is significantly enhanced, particularly in young differentiated melanocytes. Additionally, we find reduced levels of Mitf activity using an mitfa temperature-sensitive line results in a dramatic increase in differentiated melanocyte cell division. This supports models that in addition to promoting differentiation, Mitf also promotes withdrawal from the cell cycle. We suggest differentiated cell division is relevant to melanoma progression because the human melanoma mutation MITF(4T)(Δ)(2B) promotes increased and serial differentiated melanocyte division in zebrafish. These results reveal a novel pathway of differentiated melanocyte division in vivo, and that Mitf activity is essential for maintaining cell cycle arrest in differentiated melanocytes.