The compound eye of Drosophila melanogaster is configured by a differentiating wave, the morphogenetic furrow, that sweeps across the eye imaginal disc and transforms thousands of undifferentiated cells into a precisely ordered repetitive array of 800 ommatidia. The initiation of the furrow at the posterior margin of the epithelium and its subsequent movement across the eye field is controlled by the activity of the Hedgehog (Hh) signaling pathway. Differentiating photoreceptors that lie behind the furrow produce and secrete the Hh morphogen, which is captured by cells within the furrow itself. This leads to the stabilization of the full-length form of the zinc-finger transcription factor Cubitus interruptus (Ci155), the main effector of Hh signaling. Ci155 functions as a transcriptional activator of a number of downstream targets, including decapentaplegic (dpp), a TGFβ homolog. In this report, we describe a mechanism that is in place within the fly retina to limit Hh pathway activity within and ahead of the furrow. We demonstrate that the helix-loop-helix (HLH) protein Extramacrochaetae (Emc) regulates Ci155 levels. Loss of emc leads to an increase in Ci155 levels, nuclear migration, apical cell constriction and an acceleration of the furrow. We find that these roles are distinct from the bHLH protein Hairy (H), which we show restricts atonal (ato) expression ahead of the furrow. Secondary furrow initiation along the dorsal and ventral margins is blocked by the activity of the Wingless (Wg) pathway. We also show that Emc regulates and cooperates with Wg signaling to inhibit lateral furrow initiation.