Cell fate specification during organogenesis is usually followed by a phase of cell proliferation to produce the required number of differentiated cells. The Caenorhabditis elegans vulva is an excellent model to study how cell fate specification and cell proliferation are coordinated. The six vulval precursor cells (VPCs) are born at the first larval stage, but they arrest in the G1 phase of the cell cycle until the beginning of the third larval stage, when their fates are specified and the three proximal VPCs proliferate to generate 22 vulval cells. An epidermal growth factor (EGF) signal from the gonadal anchor cell combined with lateral DELTA/NOTCH signaling between the VPCs determine the primary (1°) and secondary (2°) fates, respectively. The hox gene lin-39 plays a key role in integrating these spatial patterning signals and in maintaining the VPCs as polarized epithelial cells. Using a fusion-defective eff-1(lf) mutation to keep the VPCs polarized, we find that VPCs lacking lin-39 can neither activate lateral NOTCH signaling nor proliferate. LIN-39 promotes cell cycle progression through two distinct mechanisms. First, LIN-39 maintains the VPCs competent to proliferate by inducing cdk-4 cdk and cye-1 cyclinE expression via a non-canonical HOX binding motif. Second, LIN-39 activates in the adjacent VPCs the NOTCH signaling pathway, which promotes VPC proliferation independently of LIN-39. The hox gene lin-39 is therefore a central node in a regulatory network coordinating VPC differentiation and proliferation.