Members of the AF4/FMR2 family of nuclear proteins are involved in human diseases such as acute lymphoblastic leukemia and mental retardation. Here we report the identification and characterization of the Drosophila lilliputian (lilli) gene, which encodes a nuclear protein related to mammalian AF4 and FMR2. Mutations in lilli suppress excessive neuronal differentiation in response to a constitutively active form of Raf in the eye. In the wild type, Lilli has a partially redundant function in the Ras/MAPK pathway in differentiation but it is essential for normal growth. Loss of Lilli function causes an autonomous reduction in cell size and partially suppresses the increased growth associated with loss of PTEN function. These results suggest that Lilli acts in parallel with the Ras/MAPK and the PI3K/PKB pathways in the control of cell identity and cellular growth.