During retinal development, common precursors give rise to various types of cells in a time course specific to each cell type. Previously, we demonstrated that the bHLH gene Hes1 inhibits neuronal differentiation whereas, in Hes1-null retina, precursors prematurely differentiate into neurons and form abnormal rosette-like structures. Thus, Hes1 is essential for maintenance of precursors and morphogenesis of the neural retina. However, the precise causal link between premature differentiation and abnormal structures remains to be determined. Here, we found that misexpression of Hes1 in the developing retina promotes formation of undifferentiated precursor-like cells, whereas in Hes1-null retina, precursors are not properly maintained and prematurely differentiate into ganglion cells. Strikingly, those prematurely differentiated ganglion cells erupt into the subretinal space through the regions where precursors and the outer limiting membrane are lost. These results indicate that Hes1 maintains precursors and the outer limiting membrane and thereby regulates retinal morphogenesis.