Understanding the mechanisms that regulate the transition between the proliferative and a post-mitotic state of retinal progenitor cells (RPCs) is key to advancing our knowledge of retinal growth and maturation. In the present study we determined that during zebrafish embryonic retinal neurogenesis, two paired-type homeobox genes - vsx2 and dmbx1 - function in a mutually antagonistic manner. We demonstrate that vsx2 gene expression requires active Fgf signalling and that this in turn suppresses dmbx1 expression and maintains cells in an undifferentiated, proliferative RPC state. This vsx2-dependent RPC state can be prolonged cell-autonomously by knockdown of dmbx1, or it can be suppressed prematurely by the over-expression of dmbx1, which we show can inhibit vsx2 expression and lead to precocious neuronal differentiation. dmbx1 loss of function also results in altered expression of canonical cell cycle genes, and in particular up-regulation of ccnd1, which correlates with our previous finding of a prolonged RPC cell cycle. By knocking down ccnd1 and dmbx1 simultaneously, we show that RPCs can overcome this phenotype to exit the cell cycle on time and differentiate normally into retinal neurons. Collectively, our data provide novel insight into the mechanism that enables RPCs to exit the cell cycle though a previously unrecognized antagonistic interaction of two paired-type homeobox genes that are central regulators of an Fgf-vsx2-dmbx1-ccnd1 signalling axis.