In this study, we have characterized the ocular defects in the recessive zebrafish mutant blowout that presents with a variably penetrant coloboma phenotype. blowout mutants develop unilateral or bilateral colobomas and as a result, the retina and retinal pigmented epithelium are not contained within the optic cup. Colobomas result from defects in optic stalk morphogenesis whereby the optic stalk extends into the retina and impedes the lateral edges of the choroid fissure from meeting and fusing. The expression domain of the proximal optic vesicle marker pax2a is expanded in blowout at the expense of the distal optic vesicle marker pax6, suggesting that the initial patterning of the optic vesicle into proximal and distal territories is disrupted in blowout. Later aspects of distal optic cup formation (i.e. retina development) are normal in blowout mutants, however. Positional cloning of blowout identified a nonsense mutation in patched1, a negative regulator of the Hedgehog pathway, as the underlying cause of the blowout phenotype. Expanded domains of expression of the Hedgehog target genes patched1 and patched2 were observed in blowout, consistent with a loss of Patched1 function and upregulation of Hedgehog pathway activity. Moreover, colobomas in blowout could be suppressed by pharmacologically inhibiting the Hedgehog pathway with cyclopamine, and maximal rescue occurred when embryos were exposed to cyclopamine between 5.5 and 13 hours post-fertilization. These observations highlight the critical role that Hedgehog pathway activity plays in mediating patterning of the proximal/distal axis of the optic vesicle during the early phases of eye development and they provide genetic confirmation for the integral role that patched1-mediated negative regulation of Hedgehog signaling plays during vertebrate eye development.