Paired box 6 (Pax6) is considered to be the master control gene for eye development in all seeing animals studied so far. In vertebrates, it is required not only for lens/retina formation but also for the development of the CNS, olfactory system, and pancreas. Although Pax6 plays important roles in cell differentiation, proliferation, and patterning during the development of these systems, the underlying mechanism remains poorly understood. In the fruit fly, Drosophila melanogaster, Pax6 also functions in a range of tissues, including the eye and brain. In this report, we describe the function of Pax6 in Drosophila eye-antennal disc development. Previous studies have suggested that the two fly Pax6 genes, eyeless (ey) and twin of eyeless (toy), initiate eye specification, whereas eyegone (eyg) and the Notch (N) pathway independently regulate cell proliferation. Here, we show that Pax6 controls eye progenitor cell survival and proliferation through the activation of teashirt (tsh) and eyg, thereby indicating that Pax6 initiates both eye specification and proliferation. Although simultaneous loss of ey and toy during early eye-antennal disc development disrupts the development of all head structures derived from the eye-antennal disc, overexpression of N or tsh in the absence of Pax6 rescues only antennal and head epidermis development. Furthermore, overexpression of tsh induces a homeotic transformation of the fly head into thoracic structures. Taking these data together, we demonstrate that Pax6 promotes development of the entire eye-antennal disc and that the retinal determination network works to repress alternative tissue fates, which ensures proper development of adult head structures.