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Differentiation of the Drosophila retina is asynchronous: it starts at the posterior margin of the eye imaginal disc and progresses anteriorly over two days. During this time the disc continues to grow, increasing in size by approximately eightfold. An indentation in the epithelium, the morphogenetic furrow, marks the front edge of the differentiation wave. Anterior progression of the furrow is thought to be driven by signals emanating from differentiating photoreceptor cells in the posterior eye disc. A good candidate for such a signal is the product of the hedgehog (hh) gene; it is expressed, and presumably secreted, by differentiating photoreceptors and its function is required for continued furrow movement. Here we show that ectopic expression of hedgehog sets in motion ectopic furrows in the anterior eye disc. In addition to changes in cell shape, these ectopic furrows are associated with a tightly orchestrated series of events, including proliferation, cell cycle synchronization and pattern formation, that parallel normal furrow progression. We propose that the morphogenetic furrow coincides with a transient boundary that coordinates growth and differentiation of the eye disc, and that hedgehog is necessary and sufficient to propagate this boundary across the epithelium.