In the adult mammalian retina, the principal direction of information flow is along a vertical pathway from photoreceptors to retinal interneurons to ganglion cells, the output neurons of the retina. We report here, however, that initially in development, at a time when the photoreceptors are not yet even present, there are already functionally defined networks within the retina. These networks are spontaneously active rather than visually driven, and they involve horizontal rather than vertical pathways. By means of optical recording using the calcium-sensitive dye Fura-2, we have found that sets of retinal ganglion cells and amacrine cells, a type of retinal interneuron, undergo synchronized oscillations in intracellular calcium concentration. These oscillations are highly correlated among subgroups of neighbouring cells, and spread in a wave-like fashion tangentially across the retina. Thus, in development of retinal circuitry, the initial patterning of neuronal function occurs in the horizontal domain before the adult pattern of vertical information transfer emerges.