The correct targeting of photoreceptor neurons (R-cells) in the developing Drosophila visual system requires multiple guidance systems in the eye-brain complex as well as the precise organization of the target area. Here, we report that the egghead (egh) gene, encoding a glycosyltransferase, is required for a compartment boundary between lamina glia and lobula cortex, which is necessary for appropriate R1-R6 innervation of the lamina. In the absence of egh, R1-R6 axons form a disorganized lamina plexus and some R1-R6 axons project abnormally to the medulla instead of the lamina. Mosaic analysis demonstrates that this is not due to a loss of egh function in the eye or in the neurons and glia of the lamina. Rather, as indicated by clonal analysis and cell-specific genetic rescue experiments, egh is required in cells of the lobula complex primordium which transiently abuts the lamina and medulla in the developing larval brain. In the absence of egh, perturbation of sheath-like glial processes occurs at the boundary region delimiting lamina glia and lobula cortex, and inappropriate invasion of lobula cortex cells across this boundary region disrupts the pattern of lamina glia resulting in inappropriate R1-R6 innervation. This finding underscores the importance of the lamina/lobula compartment boundary in R1-R6 axon targeting.