We have isolated a novel otx-like homeobox gene, Crx, from the mouse retina. Crx expression is restricted to developing and mature photoreceptor cells. CRX bound and transactivated the sequence TAATCC/A, which is found upstream of several photoreceptor-specific genes, including the opsin genes from many species. Overexpression of Crx using a retroviral vector increased the frequency of clones containing exclusively rod photoreceptors and reduced the frequency of clones containing amacrine interneurons and Müller glial cells. In addition, presumptive photoreceptor cells expressing a dominant-negative form of CRX failed to form proper photoreceptor outer segments and terminals. Crx is a novel photoreceptor-specific transcription factor and plays a crucial role in the differentiation of photoreceptor cells.