The mammalian retina is a tractable model system for analyzing transcriptional networks that guide neural development. Spalt family zinc-finger transcription factors play a crucial role in photoreceptor specification in Drosophila, but their role in mammalian retinal development has not been investigated. In this study, we show that that the spalt homolog Sall3 is prominently expressed in developing cone photoreceptors and horizontal interneurons of the mouse retina and in a subset of cone bipolar cells. We find that Sall3 is both necessary and sufficient to activate the expression of multiple cone-specific genes, and that Sall3 protein is selectively bound to the promoter regions of these genes. Notably, Sall3 shows more prominent expression in short wavelength-sensitive cones than in medium wavelength-sensitive cones, and that Sall3 selectively activates expression of the short but not the medium wavelength-sensitive cone opsin gene. We further observe that Sall3 regulates the differentiation of horizontal interneurons, which form direct synaptic contacts with cone photoreceptors. Loss of function of Sall3 eliminates expression of the horizontal cell-specific transcription factor Lhx1, resulting in a radial displacement of horizontal cells that partially phenocopies the loss of function of Lhx1. These findings not only demonstrate that Spalt family transcription factors play a conserved role in regulating photoreceptor development in insects and mammals, but also identify Sall3 as a factor that regulates terminal differentiation of both cone photoreceptors and their postsynaptic partners.