Yan is an ETS-domain transcription factor responsible for maintaining Drosophila eye cells in a multipotent state. Using a fluorescent reporter for Yan expression, we observed a biphasic distribution of Yan in multipotent cells. Transitions to various differentiated states occurred over the course of this dynamic process, suggesting that Yan expression level does not strongly determine cell potential. Consistent with this conclusion, perturbing Yan expression by varying gene dosage had no effect on cell fate transitions. However, we observed that as cells transited to differentiation, Yan expression became highly heterogeneous and this heterogeneity was transient. Signals received via the EGF Receptor were necessary for the transience in Yan noise since genetic loss caused sustained noise. Since these signals are essential for eye cells to differentiate, we suggest that dynamic heterogeneity of Yan is a necessary element of the transition process, and cell states are stabilized through noise reduction.