The Drosophila compound eye has long served as an outstanding model system to study many processes, including cell fate specification, cell division, cell growth and cell death. In addition, exploring the molecular basis of eye specification in Drosophila has identified a set of nuclear factors that trigger the conversion of a group of multipotent epithelial cells into eye primordia. These nuclear factors act in complex networks to regulate retinal specification and appear to be conserved throughout phylogeny. Finally, evidence suggests that these nuclear networks have been co-opted to specify cell fates in other tissues. We review the latest developments in the field of retinal specification in Drosophila and discuss several future directions that remain open for investigation.