Vertebrate eye development begins at the gastrula stage, when a region known as the eye field acquires the capacity to generate retina and lens. Optx2, a homeobox gene of the sine oculis-Six family, is selectively expressed in this early eye field and later in the lens placode and optic vesicle. The distal and ventral portion of the optic vesicle are fated to become the retina and optic nerve, whereas the dorsal portion eventually loses its neural characteristics and activates the synthesis of melanin, forming the retinal pigment epithelium. Optx2 expression is turned off in the future pigment epithelium but remains expressed in the proliferating neuroblasts and differentiating cells of the neural retina. When an Optx2-expressing plasmid is transfected into embryonic or mature chicken pigment epithelial cells, these cells adopt a neuronal morphology and express markers characteristic of developing neural retina and photoreceptors. One explanation of these results is that Optx2 functions as a determinant of retinal precursors and that it has induced the transdifferentiation of pigment epithelium into retinal neurons and photoreceptors. We also have isolated optix, a Drosophila gene that is the closest insect homologue of Optx2 and Six3. Optix is expressed during early development of the fly head and eye primordia.