The chick retina has three types of cholinergic amacrine cells. We have found that Types I and II differentiate from a common population of postmitotic cells temporarily located in the inner plexiform layer (IPL cells). Golgi staining and immunocytochemistry for choline acetyltransferase (ChAT) and gamma-aminobutyric acid (GABA) were used to trace the development and fate of IPL cells. Transformation of the shape of IPL cells into those typical of both conventional amacrine cells and those displaced to the ganglion cell layer are seen. All IPL cells are doubly immunoreactive, for ChAT and GABA, from the time they appear as a cell population within the inner plexiform layer (IPL) until their separation into the two amacrine cell populations. Polarization and early stages of shape differentiation of both types occur while they are in the IPL, starting in the dorsocentral area in the temporal retina and spreading to the rest of the retina. Three spatial gradients of differentiation are observed: from central-to-peripheral, dorsal-to-ventral, and temporal-to-nasal retina. Our findings suggest that the fate of both types of cells in the chick is determined locally, whereas their postmitotic precursors are within the IPL. The presence of GABA and acetylcholine in both types of amacrine cells at early stages of their morphogenesis, well before they have synaptic interactions, suggests a morphogenetic role for these molecules in inner retinal differentiation.