The regulation of indoleamine N-acetyltransferase (NAT) in the posterior eye was investigated in vivo, and in vitro in cultured eye cups. Surgical separation of neural retina from the retinal pigment epithelium-choroid complex indicated that NAT was localized to neural retina. The activity of retinal NAT fluctuated in vivo in a rhythmic fashion, with peak activity in the dark phase of the light-dark cycle. The rhythm of NAT activity persisted for up to 3 days in constant darkness, with a rhythmic period of approximately 25 h. The rhythm was suppressed by constant light, and could be phase-shifted by exposure to a new light-dark cycle. These observations indicate that retinal NAT activity occurs as a circadian rhythm that is entrained by light and dark. Retinas also responded to light and dark in vitro with changes of NAT activity. A significant increase in retinal NAT activity occurred in eye cups cultured in darkness during the dark phase of the light-dark cycle. This increase was completely suppressed in eye cups cultured at the same time of day in light. The dark-induced increase in NAT was completely blocked by protein synthesis inhibitors, and mimicked in light by cyclic AMP analogs. The similarity of the regulation of NAT activity in retina to that in pineal, and the possible relationship of the retinal NAT rhythm to cyclic metabolism in photoreceptors are discussed.