Understanding the molecular mechanisms by which distinct cell fate is determined during organogenesis is a central issue in development and disease. Here, using conditional gene ablation in mice, we show that the transcription factor Otx2 is essential for retinal photoreceptor cell fate determination and development of the pineal gland. Otx2-deficiency converted differentiating photoreceptor cells to amacrine-like neurons and led to a total lack of pinealocytes in the pineal gland. We also found that Otx2 transactivates the cone-rod homeobox gene Crx, which is required for terminal differentiation and maintenance of photoreceptor cells. Furthermore, retroviral gene transfer of Otx2 steers retinal progenitor cells toward becoming photoreceptors. Thus, Otx2 is a key regulatory gene for the cell fate determination of retinal photoreceptor cells. Our results reveal the key molecular steps required for photoreceptor cell-fate determination and pinealocyte development.