The visual system of insects is a multilayered structure composed externally by the compound eye and internally by the three ganglia of the optic lobe: lamina, medulla and the lobula complex. The differentiation of lamina neurons depends heavily on Hedgehog (Hh) signaling, which is delivered by the incoming photoreceptor axons, and occurs in a wave-like fashion. Despite the primary role of lamina neurons in visual perception, it is still unclear how these neurons are specified from neuroepithelial (NE) progenitors. Here we show that a homothorax (hth)-eyes absent (eya)-sine oculis (so)-dachshund (dac) gene regulatory cassette is involved in this specification. Lamina neurons differentiate from NE progenitors that express hth, eya and so. One of the first events in the differentiation of lamina neurons is the upregulation of dac expression in response to Hh signaling. We show that this dac upregulation, which marks the transition from NE progenitors into lamina precursors, also requires Eya/So, the expression of which is locked in by mutual feedback. dac expression is crucial for lamina differentiation because it ensures repression of hth, a negative regulator of single-minded, and thus dac allows further lamina neuron differentiation. Therefore, the specification of lamina neurons is controlled by coupling the cell-autonomous hth-eya-so-dac regulatory cassette to Hh signaling.