This study addresses one genetic regulatory mechanism that establishes the distinct identities of rod and cone photoreceptors. Previous work has shown that mutations in either humans or mice in the gene coding for photoreceptor-specific nuclear receptor Nr2e3 cause a progressive retinal degeneration characterized by increased numbers of short-wave cones. In the present work, we have examined the cellular and developmental pattern of Nr2e3 protein localization in mammals and fish, identified an optimal Nr2e3 DNA-binding site using cycles of binding to recombinant Nr2e3, characterized the transcriptional activity of wild type and one of the disease-associated point mutations in Nr2e3 in transfected cells, and characterized the transcriptional defects in the naturally occurring Nr2e3 mutant (rd7) mouse. These experiments indicate that in the mature vertebrate retina Nr2e3 is expressed exclusively in rods, that expression of Nr2e3 is one of the earliest events in the pathway of rod-specific photoreceptor development, and that Nr2e3 functions, either directly or indirectly, as a repressor of cone-specific genes in rod photoreceptor cells.