Different Drosophila photoreceptors (R cells) connect to neurons in different optic lobe layers. R1–R6 axons project to the lamina; R7 and R8 axons project to separate layers of the medulla. We show a receptor tyrosine phosphatase, PTP69D, is required for lamina target specificity. In Ptp69D mutants, R1–R6 project through the lamina, terminating in the medulla. Genetic mosaics, transgene rescue, and immunolocalization indicate PTP69D functions in R1–R6 growth cones. PTP69D overexpression in R7 and R8 does not respecify their connections, suggesting PTP69D acts in combination with other factors to determine target specificity. Structure–function analysis indicates the extracellular fibronectin type III domains and intracellular phosphatase activity are required for targeting. We propose PTP69D promotes R1–R6 targeting in response to extracellular signals by dephosphorylating substrate(s) in R1–R6 growth cones.