The timing of behavior under natural light-dark conditions is a function of circadian clocks and photic input pathways. Yet a mechanistic understanding of how these pathways collaborate in animals is lacking. Here we demonstrate in Drosophila that the Phosphatase of Regenerating Liver-1 (PRL-1) sets period length and behavioral phase gated by photic signals. PRL-1 knockdown in PDF clock neurons dramatically lengthens circadian period. PRL-1 mutants exhibit allele-specific interactions with the light- and clock-regulated gene timeless (tim). Moreover, we show that PRL-1 promotes TIM accumulation and dephosphorylation. Interestingly, the PRL-1 mutant period lengthening is suppressed in constant light and PRL-1 mutants display a delayed phase under short, but not long, photoperiod conditions. Thus, our studies reveal that PRL-1 dependent dephosphorylation of TIM is a core mechanism of the clock that sets period length and phase in darkness, enabling the behavioral adjustment to changing day-night cycles.