Zebrafish retinal homeobox genes rx1 and rx2 are expressed exclusively in the optic primordia and then in cone photoreceptors of the differentiated neural retina. In this study, we show that the rx expression domain is coextensive with the region identified as the retinal field in published fate maps of the neural plate in zebrafish embryos. Analysis of the spatiotemporal relationships between retinal and forebrain precursors suggests that lateral movement of retinal precursors is responsible for evagination of the optic primordia. Overexpression of either rx1 or rx2 results in the loss of forebrain tissue and the ectopic formation of retinal tissue. We asked whether the deletion of forebrain and expansion of retinal tissue could be explained by the death of telencephalic precursors and enhanced proliferation of retinal precursors, and we found that it could not. Instead, our data are consistent with a change in cell fate of forebrain precursors associated with reduced expression of telencephalic markers (emx1 and BF-1) and ectopic expression of retinal markers (rx1/2/3, pax6, six6, and vsx2) at the neural keel stage. The rx homeodomain alone is sufficient to induce ectopic retinal tissue, although weakly so, and this observation, together with results from deletion constructs, suggests that interactions with unidentified transcriptional regulators are important for rx1 and rx2 function during early eye development. We conclude that regulated expression of zebrafish rx1 and rx2 helps to define the region of the forebrain fated to give rise to retinal tissue and may be involved in the cellular migrations that lead to splitting of the retinal field and formation of the optic primordia.