It has long been known that loss of the retinoblastoma protein (Rb) perturbs neural differentiation, but the underlying mechanism has never been solved. Rb absence impairs cell cycle exit and triggers death of some neurons, so differentiation defects may well be indirect. Indeed, we show that abnormalities in both differentiation and light-evoked electrophysiological responses in Rb-deficient retinal cells are rescued when ectopic division and apoptosis are blocked specifically by deleting E2f transcription factor (E2f) 1. However, comprehensive cell-type analysis of the rescued double-null retina exposed cell-cycle-independent differentiation defects specifically in starburst amacrine cells (SACs), cholinergic interneurons critical in direction selectivity and developmentally important rhythmic bursts. Typically, Rb is thought to block division by repressing E2fs, but to promote differentiation by potentiating tissue-specific factors. Remarkably, however, Rb promotes SAC differentiation by inhibiting E2f3 activity. Two E2f3 isoforms exist, and we find both in the developing retina, although intriguingly they show distinct subcellular distribution. E2f3b is thought to mediate Rb function in quiescent cells. However, in what is to our knowledge the first work to dissect E2f isoform function in vivo we show that Rb promotes SAC differentiation through E2f3a. These data reveal a mechanism through which Rb regulates neural differentiation directly, and, unexpectedly, it involves inhibition of E2f3a, not potentiation of tissue-specific factors.