SUMMARYIt is currently unclear how intrinsic and extrinsic mechanisms cooperate to control the progression from self-renewing to neurogenic divisions in retinal precursor cells. Here, we use the zebrafish flotte lotte (flo) mutant, which carries a mutation in the elys (ahctf1) gene, to study the relationship between cell cycle progression and neuronal differentiation by investigating how proliferating progenitor cells transition towards differentiation in a retinal stem cell niche termed the ciliary marginal zone (CMZ). In zebrafish embryos without Elys, CMZ cells retain the capacity to proliferate but lose the ability to enter their final neurogenic divisions to differentiate as neurons. However, mosaic retinae composed of wild-type and flo cells show that despite inherent cell cycle defects, flo mutant cells progress from proliferation to differentiation when in the vicinity of wild-type retinal neurons. We propose that the differentiated retinal environment limits the proliferation of precursors emerging from the CMZ in a manner that explains the spatial organisation of cells in the CMZ and ensures that proliferative retinal progenitors are driven towards differentiation.