Drosophila eye specification and development relies on a collection of transcription factors termed the retinal determination gene network (RDGN). Two members of this network, Eyes absent (EYA) and Sine oculis (SO), form a transcriptional complex in which EYA provides the transactivation function while SO provides the DNA binding activity. EYA also functions as a protein tyrosine phosphatase, raising the question of whether transcriptional output is dependent or independent of phosphatase activity. To explore this, we used microarrays together with binding site analysis, quantitative real-time PCR, chromatin immunoprecipitation, genetics and in vivo expression analysis to identify new EYA-SO targets. In parallel, we examined the expression profiles of tissue expressing phosphatase mutant eya and found that reducing phosphatase activity did not globally impair transcriptional output. Among the targets identified by our analysis was the cell cycle regulatory gene, string (stg), suggesting that EYA and SO may influence cell proliferation through transcriptional regulation of stg. Future investigation into the regulation of stg and other EYA-SO targets identified in this study will help elucidate the transcriptional circuitries whereby output from the RDGN integrates with other signaling inputs to coordinate retinal development.