Insufficient cell number is a primary cause of failed retinal development in the Chx10 mutant mouse. To determine if Chx10 regulates cell number by antagonizing p27(Kip1) activity, we generated Chx10, p27(Kip1) double null mice. The severe hypocellular defect in Chx10 single null mice is alleviated in the double null, and while Chx10-null retinas lack lamination, double null retinas have near normal lamination. Bipolar cells are absent in the double null retina, a defect that is attributable to a requirement for Chx10 that is independent of p27(Kip1). We find that p27(Kip1) is abnormally present in progenitors of Chx10-null retinas, and that its ectopic localization is responsible for a significant amount of the proliferation defect in this microphthalmia model system. mRNA and protein expression patterns in these mice and in cyclin D1-null mice suggest that Chx10 influences p27(Kip1) at a post-transcriptional level, through a mechanism that is largely dependent on cyclin D1. This is the first report of rescue of retinal proliferation in a microphthalmia model by deletion of a cell cycle regulatory gene.