The development of the crayfish retina was examined in embryos and first, second and third instars with both and light and electron microscope. Light microscopic observations indicate that differentiation begins at the posterior portion of the optic disc and progresses in an anterior direction. Development of screening pigment, dioptric elements, and rhabdoms all parallel this posterior to anterior gradient in the retina. Tracer studies in early embryos reveal that the retina is separated from the proximal neuropil regions by a distinct vascular space. This observation suggests that the source of new cells for the retina may not be the more proximal cell proliferation zone as previously indicated. It is proposed that mitotic activity within the retina and/or differentiation of cells from the anterior surface layer of the eye may be sources for addition of new cells to the retina. Proto-ommatidial clusters of seven retinula cells occur very early at the posterior region of the embryonic retina. Initially the receptor cells extend throughout the entire thickness of the retina, but later they withdraw from beneath the cornea to occupy only the proximal portion of the retina. Microvilli of the rhabdom arise from the centrally opposed membranes of the retinula cells in each cell cluster. Each new microvillus contains a core of fine filaments which extend out into the cytoplasm at its base. As development of the microvilli continues, the core filaments appear to be lost or altered, but the cytoplasmic bundles at the base of the microvilli persist.