The neural retina in teleost fish can regenerate after surgical or neurotoxic destruction. Whereas in amphibians the retina regenerates by transdifferentiation of pigmented retinal epithelial cells, in goldfish (Carassius auratus) the source of regenerated retinal cells is a population of scattered proliferating cells located in the outer nuclear layer within the differentiated retina. These proliferating cells are modified neuroepithelial cells termed 'rod precursors' because in the intact retina they produce only rod photoreceptor cells and do so continuously, inserting new rods into the growing adult retina. Although rod precursors normally exhibit a restricted developmental fate they appear not to be committed to the rod lineage. When retinal neurons are destroyed, rod precursors cease producing rods and give rise to clusters of primitive neuroepithelial cells which divide vigorously and reconstitute the retina in an orderly temporal pattern that mimics the process of normal development. Only after production of cones and other retinal neurons has ceased do rod precursors again appear and resume the generation of rods. We conclude that rod precursors respond to local cues in their environment that regulate the differentiation and choice of cell fate by their progeny.