During eye development, optic vesicles evaginate laterally from the neural tube and develop into two bilayered eye cups that are composed of an outer pigment epithelium layer and an inner neural retina layer. Despite their similar embryonic origin, the pigment epithelium and neural retina differentiate into two very distinct tissues. Previous studies have demonstrated that the developmental potential of the pigmented epithelial cells is not completely restricted; until embryonic day 4.5 in chick embryos, the cells are able to switch their phenotype and differentiate into neural retina when treated with fibroblast growth factors (FGF) (Park, C. M., and Hollenberg, M. J. (1989). Dev. Biol. 134, 201-205; Pittack, C., Jones, M., and Reh, T. A. 1991). Development 113, 577-588; Guillemot, F. and Cepko, C. L. (1992). Development 114, 743-754). These studies motivated us to test whether FGF is necessary for neural retina differentiation during the initial stages of eye cup development. Optic vesicles from embryonic day 1.5 chick were cultured for 24 hours as explants in the presence of FGF or neutralizing antibodies to FGF2. The cultured optic vesicles formed eye cups that contained a lens vesicle, neural retina and pigmented epithelium, based on morphology and expression of neural and pigmented epithelium-specific antigens. Addition of FGF to the optic vesicles caused the presumptive pigmented epithelium to undergo neuronal differentiation and, as a consequence, a double retina was formed. By contrast, neutralizing antibodies to FGF2 blocked neural differentiation in the presumptive neural retina, without affecting pigmented epithelial cell differentiation. These data, along with evidence for expression of several FGF family members and their receptors in the developing eye, indicate that members of the FGF family may be required for establishing the distinction between the neural retina and pigmented epithelium in the optic vesicle.