Mutations at the lozenge (lz) locus are pleiotropic, primarily affecting the sense organs for sight, smell and taste. To better understand the role that lz plays in the visual system, we investigated its complex genetics and the effect mutations have on the structure of the compound eye. Complementation analysis within the lz locus reveals two functional units necessary for a normal eye, cistrons A and B. Previous recombination studies identified four subloci spanning 0.14 m.u. Cistron A mutations map to the distal-most spectacle sub-locus, which has been identified as an insertion point for P-elements. Southern blotting and chromosomal in situ hybridization show that P-allele lzmu2 contains a single P-element; a cosmid clone derived from lzmu2 confirms that the P-element is defective. Mutants of both cistrons perturb lens structure and eye pigmentation. However, the extent of the defects differs between the most severe mutations of the two cistrons. Within the eye, failure to form the fenestrated membrane permits photoreceptor neurons to "fall" into the brain disrupting neural structure. Our analysis shows that lz exerts control over the identity of cone cells, pigment cells and photoreceptor neurons.