Horizontal cells are interneurons that synapse with photoreceptors in the outer retina. Their genesis during development is subject to regulation by transcription factors in a hierarchical manner. Previously, we showed that Onecut 1 (Oc1), an atypical homeodomain transcription factor, is expressed in developing horizontal cells (HCs) and retinal ganglion cells (RGCs) in the mouse retina. Herein, by knocking out Oc1 specifically in the developing retina, we show that the majority (∼80%) of HCs fail to form during early retinal development, implying that Oc1 is essential for HC genesis. However, no other retinal cell types, including RGCs, were affected in the Oc1 knock-out. Analysis of the genetic relationship between Oc1 and other transcription factor genes required for HC development revealed that Oc1 functions downstream of FoxN4, in parallel with Ptf1a, but upstream of Lim1 and Prox1. By in utero electroporation, we found that Oc1 and Ptf1a together are not only essential, but also sufficient for determination of HC fate. In addition, the synaptic connections in the outer plexiform layer are defective in Oc1-null mice, and photoreceptors undergo age-dependent degeneration, indicating that HCs are not only an integral part of the retinal circuitry, but also are essential for the survival of photoreceptors. In sum, these results demonstrate that Oc1 is a critical determinant of HC fate, and reveal that HCs are essential for photoreceptor viability, retinal integrity, and normal visual function.