The vertebrate neural retina comprises six classes of neurons and one class of glial cells, all derived from a population of multipotent progenitors. There is little information on the molecular mechanisms governing the specification of cell type identity from multipotent progenitors in the developing retina. We report that Ptf1a, a basic-helix-loop-helix (bHLH) transcription factor, is transiently expressed by post-mitotic precursors in the developing mouse retina. Recombination-based lineage tracing analysis in vivo revealed that Ptf1a expression marks retinal precursors with competence to exclusively produce horizontal and amacrine neurons. Inactivation of Ptf1a leads to a fate-switch in these precursors that causes them to adopt a ganglion cell fate. This mis-specification of neurons results in a complete loss of horizontal cells, a profound decrease of amacrine cells and an increase in ganglion cells. Furthermore, we identify Ptf1a as a primary downstream target for Foxn4, a forkhead transcription factor involved in the genesis of horizontal and amacrine neurons. These data, together with the previous findings on Foxn4, provide a model in which the Foxn4-Ptf1a pathway plays a central role in directing the differentiation of retinal progenitors towards horizontal and amacrine cell fates.