Abstract An ectopic neural retina is formed at the outer layer of the retina in the silver homozygote ( B/ B) of the Japanese quail. In situhybridization and immunohistochemical analysis revealed that cells in the outer layer of retina first expressed a pigment-cell-specific gene, mmp115, and then began to express a neural marker in B/ Bembryos, indicating that the ectopic neural retina is formed via transdifferentiation of differentiated pigmented epithelial cells (PECs). An in vitrostudy revealed that cultured retinal PECs (rPECs) from B/ Bembryos exhibit less pigment granule and a higher growth rate than cells from heterozygotes ( B/ +). B/ +PECs stopped proliferating when confluency was reached, while B/ BPECs continued to proliferate. Some B/ Bcells overlaid other B/ Bcells and formed lentoid bodies. Immunological analysis revealed that B/ BrPECs transdifferentiated to lens cells and neural cells in vitrowith no addition of basic FGF (bFGF), while B/ +rPECs required bFGF to transdifferentiate. Expression of PEC-specific genes, mmp115, tyrosinase,and TRP-1, was downregulated, but that of Mitfand pax6was upregulated in B/ BPECs. Antibody against Mitf stained the nucleus of B/ +PECs but not that of B/ Bcells, suggesting that the normal Mitf is not present in the silver homozygote due to mutation. Sequence analysis revealed that Mitf from the silver homozygote has an amino acid substitution in the basic region and is truncated in the C-terminal region. Transient transfection analysis revealed that Mitf from the silver homozygote exhibits a lower level of activity than wild-type Mitf with respect to transactivation of the mmp115promoter. Furthermore, overexpression of chicken Mitf induced normal pigmentation in B/ BrPECs. These results strongly suggest that the silver phenotype is caused by the mutation of Mitfand that Mitfplays a critical role in rPEC differentiation and transdifferentiation.