The coordinated regulation of cell fate and cell survival is crucial for normal pattern formation in developing organisms. In Drosophila compound eye development, crystalline arrays of hexagonal ommatidia are established by precise assembly of diverse cell types, including the photoreceptor cells, cone cells and interommatidial (IOM) pigment cells. The molecular basis for controlling the number of cone and IOM pigment cells during ommatidial pattern formation is not well understood. Here we present evidence that BarH1 and BarH2 homeobox genes are essential for eye patterning by inhibiting excess cone cell differentiation and promoting programmed death of IOM cells. Specifically, we show that loss of Bar from the undifferentiated retinal precursor cells leads to ectopic expression of Prospero and dPax2, two transcription factors essential for cone cell specification, resulting in excess cone cell differentiation. We also show that loss of Bar causes ectopic expression of the TGFβ homolog Decapentaplegic (Dpp) posterior to the morphogenetic furrow in the larval eye imaginal disc. The ectopic Dpp expression is not responsible for the formation of excess cone cells in Bar loss-of-function mutant eyes. Instead, it causes reduction in IOM cell death in the pupal stage by antagonizing the function of pro-apoptotic gene reaper. Taken together, this study suggests a novel regulatory mechanism in the control of developmental cell death in which the repression of Dpp by Bar in larval eye disc is essential for IOM cell death in pupal retina.