This study was designed to determine whether adult mouse induced pluripotent stem cells (iPSCs), could be used to produce retinal precursors and subsequently photoreceptor cells for retinal transplantation to restore retinal function in degenerative hosts. iPSCs were generated using adult dsRed mouse dermal fibroblasts via retroviral induction of the transcription factors Oct4, Sox2, KLF4 and c-Myc. As with normal mouse ES cells, adult dsRed iPSCs expressed the pluripotency genes SSEA1, Oct4, Sox2, KLF4, c-Myc and Nanog. Following transplantation into the eye of immune-compromised retinal degenerative mice these cells proceeded to form teratomas containing tissue comprising all three germ layers. At 33 days post-differentiation a large proportion of the cells expressed the retinal progenitor cell marker Pax6 and went on to express the photoreceptor markers, CRX, recoverin, and rhodopsin. When tested using calcium imaging these cells were shown to exhibit characteristics of normal retinal physiology, responding to delivery of neurotransmitters. Following subretinal transplantation into degenerative hosts differentiated iPSCs took up residence in the retinal outer nuclear layer and gave rise to increased electro retinal function as determined by ERG and functional anatomy. As such, adult fibroblast-derived iPSCs provide a viable source for the production of retinal precursors to be used for transplantation and treatment of retinal degenerative disease.