Retinal bipolar cells are interneurons that transmit visual signals from photoreceptors to ganglion cells. Although the visual pathways mediated by bipolar cells have been well characterized, the genes that regulate their development and function are largely unknown. To determine the role in bipolar cell development of the homeobox gene Vsx1 , whose retinal expression is restricted to a major subset of differentiating and mature cone bipolar (CB) cells, we targeted the gene in mice. Bipolar cell fate was not altered in the absence of Vsx1 function, because the pan-bipolar markers Chx10 and Ret-B1 continued to be expressed in inner nuclear layer neurons labeled by the Vsx1 -targeting reporter gene, τ LacZ . The specification, number, and gross morphology of the subset of on-center and off-center (OFF)-CB cells defined by τ LacZ expression from the Vsx1 locus were also normal in Vsx1 τ LacZ / Vsx1 τ LacZ mice. However, the terminal differentiation of OFF-CB cells in the retina of Vsx1 τ LacZ / Vsx1 τ LacZ mice was incomplete, as demonstrated by a substantial reduction in the expression of at least four markers (recoverin, NK3R, Neto1, and CaB5) for these interneurons. These molecular abnormalities were associated with defects in retinal function and documented by electroretinography and in vitro ganglion cell recordings specific to cone visual signaling. In particular, there was a general reduction in the light-mediated activity of OFF, but not on-center, ganglion cells. Thus, Vsx1 is required for the late differentiation and function of OFF-CB cells and is associated with a heritable OFF visual pathway-specific retinal defect.