Rod and cone photoreceptors in mammalian retina are generated from common pool(s) of neuroepithelial progenitors. NRL, CRX and NR2E3 are key transcriptional regulators that control photoreceptor differentiation. Mutations in NR2E3, a rod-specific orphan nuclear receptor, lead to loss of rods, increased density of S-cones and supernormal S-cone-mediated vision in humans. To better understand its in vivo function, NR2E3 was expressed ectopically in the Nrl-/- retina, where post-mitotic precursors fated to be rods develop into functional S-cones similar to the human NR2E3 disease. Expression of NR2E3 in the Nrl-/- retina completely suppressed cone differentiation and resulted in morphologically rod-like photoreceptors, which were however not functional. Gene profiling of FACS-purified photoreceptors confirmed the role of NR2E3 as a strong suppressor of cone genes but an activator of only a subset of rod genes (including rhodopsin) in vivo. Ectopic expression of NR2E3 in cone precursors and differentiating S-cones of wild-type retina also generated rod-like cells. The dual regulatory function of NR2E3 was not dependent upon the presence of NRL and/or CRX, but on the timing and level of its expression. Our studies reveal a critical role of NR2E3 in establishing functional specificity of NRL-expressing photoreceptor precursors during retinal neurogenesis.