Whereas the mammalian retina possesses a repertoire of factors known to establish general retinal cell types, these factors alone cannot explain the vast diversity of neuronal subtypes. In other CNS regions, the differentiation of diverse neuronal pools is governed by coordinately acting LIM-homeodomain proteins including the Islet-class factor Islet-1 (Isl1). We report that deletion of Isl1 profoundly disrupts retinal function as assessed by electroretinograms and vision as assessed by optomotor behavior. These deficits are coupled with marked reductions in mature ON- and OFF-bipolar (>76%), cholinergic amacrine (93%), and ganglion (71%) cells. Mosaic deletion of Isl1 permitted a chimeric analysis of "wild-type" cells in a predominantly Isl1-null environment, demonstrating a cell-autonomous role for Isl1 in rod bipolar and cholinergic amacrine development. Furthermore, the effects on bipolar cell development appear to be dissociable from the preceding retinal ganglion cell loss, because Pou4f2-null mice are devoid of similar defects in bipolar cell marker expression. Expression of the ON- and OFF-bipolar cell differentiation factors Bhlhb4 and Vsx1, respectively, requires the presence of Isl1, whereas the early bipolar cell marker Prox1 initially did not. Thus, Isl1 is required for engaging bipolar differentiation pathways but not for general bipolar cell specification. Spatiotemporal expression analysis of additional LIM-homeobox genes identifies a LIM-homeobox gene network during bipolar cell development that includes Lhx3 and Lhx4. We conclude that Isl1 has an indispensable role in retinal neuron differentiation within restricted cell populations and this function may reflect a broader role for other LIM-homeobox genes in retinal development, and perhaps in establishing neuronal subtypes.