Retinoic acid (RA) is a biologically active metabolite of vitamin A (retinol) that serves as a signaling molecule during a number of developmental and physiological processes. RA signaling plays multiple roles during embryonic eye development. RA signaling is initially required for reciprocal interactions between the optic vesicle and invaginating lens placode. RA signaling promotes normal development of the ventral retina and optic nerve through its activities in the neural crest cell-derived periocular mesenchyme. RA coordinates these processes by regulating biological activities of a family of non-steroid hormone receptors, RARalpha/beta/gamma, and RXRalpha/beta/gamma. These DNA-binding transcription factors recognize DNA as RAR/RXR heterodimers and recruit multiprotein transcriptional co-repressor complexes. RA-binding to RAR receptors induces a conformational change in the receptor, followed by the replacement of co-repressor with co-activator complexes. Inactivation of RARalpha/beta/gamma receptors in the periocular mesenchyme abrogates anterior eye segment formation. This review summarizes recent genetic studies of RA signaling and progress in understanding the molecular mechanism of transcriptional co-activators that function with RAR/RXR.