To establish the genetic tools for conditional gene deletion in mouse retinal progenitors, we generated a Dkk3-Cre transgenic mouse line using bacterial artificial chromosome (BAC) transgenesis. Cre recombination efficiency in vivo was assayed by crossing this transgenic line, termed BAC-Dkk3-Cre, with the CAG-CAT-Z reporter line. This BAC-Dkk3-Cre line showed Cre recombinase activity in most retinal progenitors. Cre activity was detectable from embryonic day 10.5 (E10.5) and generally restricted to the retina during embryogenesis. To verify that BAC-Dkk3-Cre mice successfully circumvented lethality, we generated Otx2flox/flox/BAC-Dkk3-Cre+ mice as Otx2 conditional knockout mice. The Otx2flox/flox/BAC-Dkk3-Cre+ mice were viable, and their retina showed loss of mature cell-type markers of photoreceptor cells, bipolar cells, and horizontal cells, in contrast, amacrine-like cells noticeably increased. Thus, the BAC-Dkk3-Cre transgenic mouse line provides a powerful tool for generating conditional knockout mouse lines for studying loss of gene functions in the developing retina.