During morphogenesis, organs grow to stereotyped sizes, but growth control mechanisms are poorly understood. Here, we measured the signaling dynamics of the morphogen Dpp, one of several Drosophila factors controlling morphogenetic growth, in the developing eye. In this tissue, the Dpp expression domain advances from the posterior to the anterior tissue edge. In front of this moving morphogen source, signaling inputs including Dpp activate the target gene hairy in a gradient that scales with tissue size. Proliferation, in turn, occurs in a mitotic wave in front of the source, whereas behind it, cells arrest and differentiate. We found that cells divide when their signaling levels have increased by around 60%. This simple mechanism quantitatively explains the proliferation and differentiation waves in wild type and mutants. Furthermore, this mechanism may be a common feature of different growth factors, because a Dpp-independent growth input also follows this growth rule.