Pattern formation and ommatidial differentiation in the crayfish retina were analyzed using confocal, light and electron microscopy. Optic primordia first appear in the embryo as round elevations covered by a surface epithelial layer. Retinal differentiation begins with a wave of mitotic activity that moves across this epithelium from lateral to medial. Ommatidial cell clusters are visible at the surface along a transition zone, which lies at the interface of the medial undifferentiated retina and the lateral patterned retina. This zone is 8-10 cells wide and composed of small uniform cell profiles. Lateral to the transition zone the initial ommatidial cell clusters form staggered rows across the surface. Each first row cluster contains eight retinula cells surrounded by four cone, two corneagenous and two distal pigment cells. Ommatidial clusters in the first nine rows show significant changes in their organization, which are visible at the surface of the retina. In row 10 the retinula cells recede from the surface and the cone cells close in above them creating a constant cell pattern at the surface. Rhabdome development begins distally and extends downward as the retinula cluster recedes from the surface. Movement of the retinula cells inward and enlargement of the cone and corneagenous cells at the surface creates a two-tiered organization characteristic of each ommatidium. Comparison of retinal pattern formation and differentiation in the crayfish with retinal morphogenesis in Drosophila and other insects show several similarities between the two arthropod groups.