Rx is a paired-like homeobox gene that is required for vertebrate eye formation. Mice lacking Rx function do not develop eyes or the posterior pituitary. To determine whether Rx is required cell autonomously in these tissues, we generated embryonic chimeras consisting of wild type and Rx-/- cells. We found that in the eye, Rx-deficient cells cannot participate in the formation of the neuroretina, retina pigment epithelium and the distal part of the optic stalk. In addition, in the ventral forebrain, Rx function is required cell autonomously for the formation of the posterior pituitary. Interestingly, Rx-/- and wild type cells segregate before the morphogenesis of these two tissues begins. Our observations suggest that Rx function is not only required for the morphogenesis of the retina and posterior pituitary, but also prior to morphogenesis, for the sorting out of cells to form distinct fields of retinal/pituitary cells.