The avian pineal is a photoreceptive organ and is believed to function as a circadian clock. Avian pineal cells are secretory rudimentary photoreceptors, and previous studies have demonstrated that there are two types of photoreceptors in developing quail pineals, one of which is rhodopsin-like immunoreactive and the other iodopsin-like immunoreactive. Much larger number of rhodopsin-like immunoreactive cells than of iodopsin-like immunoreactive cells were found in quail pineals, both in vivo and in vitro. In the present study we co-cultured pineal cells of embryonic quails with retinal cells but separated the two with a bio-membrane filter. We found that diffusible material produced by the cultured retinal cells intensely promotes the appearance of pineal iodopsin-like immunoreactive cells in vitro. This effect of retina-derived factor(s) is cell-type specific, since there is no effect on the differentiation of pineal rhodopsin-like immunoreactive cells. Retinal cell cultures had much more intensive iodopsin-promoting effect than other embryonic brain cultures such as cerebral cell cultures. The production of the retinal factor(s) seems to be developmentally regulated, since retinal cells from older embryos (E13 and older) did not have such effects. The factor(s) possibly act on pineal precursor cells by stimulating the expression of the iodopsin-like immunoreactive phenotype. Preliminary characterization of conditioned medium obtained from cultured retinal cells shows that the factor is a stable polypeptide, probably of low molecular weight. The pineal-retina culture system will provide a good experimental system to analyze the effect of extrinsic environments on cell differentiation.