Microglia are cells from non-neuronal lineages that reside in the central nervous system. In zebrafish, early macrophages migrate from the yolk sac to the brain and retina at 26–30 hour post fertilization (hpf) and transform into microglia at 55–60 hpf. The migration of macrophages into the central nervous system requires signaling by macrophage colony stimulating factor-1 receptor (csf-1r), which is encoded by the gene fms. In this study, we show that the targeted knockdown of csf-1r with morpholino oligonucleotides delays migration of macrophages from the yolk sac to the retina, and this delay in macrophage migration results in microphthalmia, delay in cell cycle withdrawal among retinal progenitors and the absence of neuronal differentiation. When embryos were allowed to survive beyond the time when morpholino-dependent translation inhibition is lost, microglia re-occupy the retina and neuronal differentiation partially recovers. Our data demonstrate that microglia are required for normal retinal growth and neurogenesis. This study provides new insight into the neurogenic role of microglia during retinal development in zebrafish.