Retinal progenitor cells regulate their proliferation during development so that the correct number of each cell type is made at the appropriate time. We found that the homeodomain protein Prox1 regulates the exit of progenitor cells from the cell cycle in the embryonic mouse retina. Cells lacking Prox1 are less likely to stop dividing, and ectopic expression of Prox1 forces progenitor cells to exit the cell cycle. During retinogenesis, Prox1 can be detected in differentiating horizontal, bipolar and AII amacrine cells. Horizontal cells are absent in retinae of Prox1-/- mice and misexpression of Prox1 in postnatal progenitor cells promotes horizontal-cell formation. Thus, Prox1 activity is both necessary and sufficient for progenitor-cell proliferation and cell-fate determination in the vertebrate retina.