Cell cycle exit is required for proper differentiation in most cells and is critical for normal development, tissue homeostasis, and tumor suppression. However, the mechanisms that link cell cycle exit with differentiation remain poorly understood. Here, we show that the master melanocyte differentiation factor, microphthalmia transcription factor (MITF), regulates cell cycle exit by activating the cell cycle inhibitor INK4A, a tumor suppressor that frequently is mutated in melanomas. MITF binds the INK4A promoter, activates p16^Ink4a mRNA and protein expression, and induces retinoblastoma protein hypophosphorylation, thereby triggering cell cycle arrest. This activation of INK4A was required for efficient melanocyte differentiation. Interestingly, MITF was also required for maintaining INK4A expression in mature melanocytes, creating a selective pressure to escape growth inhibition by inactivating INK4A. These findings demonstrate that INK4A can be regulated by a differentiation factor, establish a mechanistic link between melanocyte differentiation and cell cycle exit, and potentially explain the tissue-specific tendency for INK4A mutations to occur in melanoma.