The neurogenic gene Xotch acts to divert cellular determination during gastrulation in Xenopus embryos. We examined the role of Xotch in the developing retina, where cell signaling events are thought to affect differentiation. Xotch is expressed in undifferentiated precursor cells of the ciliary marginal zone and late embryonic central retina. It is not expressed in stem cells or in differentiated neurons and glia. Expression in the retina is spatially restricted even in the absence of cell division. The final Xotch-positive precursor cells in the central retina mostly differentiate as Müller glia, suggesting that this is the last available fate of cells in the frog retina. Transfection of an activated form of Xotch into isolated retinal cells causes them to retain a neuroepithelial morphology, indicating that the continued activation of Xotch inhibits cell differentiation.