The Drosophila cyclin E (DmcycE) gene gives rise to two transcripts encoding proteins that differ at their N termini, DmcycEII and DmcycEI. This study presents the first in vivo dissection of Cyclin E function. Ectopic expression studies using N- and C-terminal deletions of DmcycEI revealed that a region of 322 residues surrounding the cyclin box is sufficient to induce entry of G1-arrested larval eye imaginal disc cells into S phase. Ectopic expression of DmcycEI in the eye disc has been previously shown to drive anterior, but not posterior, G1-phase cells within the morphogenetic furrow (MF) into S phase. Significantly, ectopic expression of DmcycEII and N-terminal deletions of DmcycEI were able to drive all G1 cells within the morphogenetic furrow into S phase, while a C-terminal deletion of DmcycEI could not. The p21 homolog Dacapo was shown by yeast two-hybrid, coimmunolocalization, and in vivo functional studies not to be the mediator of the DmcycEI inhibition in posterior part of the MF. Taken together, these results reveal a novel zone within the posterior region of the MF where DmcycEI but not DmcycEII function is inhibited, and suggest that DmcycEII is a more potent inducer of S phase.