The transcription factor Nr2e3 is an essential component for development and specification of rod and cone photoreceptors; however, the mechanism through which it acts is not well understood. In this study, we use Nr2e3(rd7/rd7) mice that harbor a mutation in Nr2e3, to serve as a model for the human retinal disease Enhanced S Cone Syndrome. Our studies reveal that NR2E3 is expressed in late retinal progenitors and differentiating photoreceptors of the developing retina and localized to the cell bodies of mature rods and cones. In particular, we demonstrate that the abnormal increase in cone photoreceptors observed in Nr2e3(rd7/rd7) mice arise from ectopic mitotic progenitor cells that are present in the outer nuclear layer of the mature Nr2e3(rd7/rd7) retina. A prolonged phase of proliferation is observed followed by abnormal retinal lamination with fragmented and disorganized photoreceptor synapses that result in a progressive loss of rod and cone function. An extended and pronounced wave of apoptosis is also detected at P30 and temporally correlates with the phase of prolonged proliferation. Approximately twice as many apoptotic cells were detected compared to proliferating cells. This wave of apoptosis appears to affect both rod and cone cells and thus may account for the concurrent loss of rod and cone function. We further show that Nr2e3(rd7/rd7) cones do not express rod specific genes and Nr2e3(rd7/rd7) rods do not express cone specific genes. Our studies suggest that, based on its temporal and spatial expression, NR2E3 acts simultaneously in different cell types: in late mitotic progenitors, newly differentiating post mitotic cells, and mature rods and cones. In particular, this study reveals the function of NR2E3 in mitotic progenitors is to repress the cone generation program. NR2E3 is thus one of the few genes known to influence the competency of retinal progenitors while simultaneously directing the rod and cone differentiation.