Before phototransduction, spontaneous activity in the developing mammalian retina is required for the appropriate patterning of retinothalamic connections, and there is growing evidence that this activity influences the development of circuits within the retina itself. We demonstrate here that the neural substrate that generates waves in the mouse retina develops through three distinct stages. First, between embryonic day 16 and birth [postnatal day 0 (P0)], we observed both large, propagating waves inhibited by nicotinic acetylcholine receptor (nAChR) antagonists and small clusters of cells displaying nonpropagating, correlated calcium increases that were independent of nAChR activation. Second, between P0 and P11, we observed only larger propagating waves that were abolished by toxins specific to alpha3 and beta2 subunit-containing nAChRs. Third, between P11 and P14 (eye opening) we observed propagating activity that was abolished by ionotropic glutamate receptor antagonists. The time course of this developmental shift was dramatically altered in retinas from mice lacking the beta2 nAChR subunit or the beta2 and beta4 subunits. These retinas exhibited a novel circuit at P0, no spontaneous correlated activity between P1 and P8, and the premature induction at P8 of an ionotropic glutamate receptor-based circuit. Retinas from postnatal mice lacking the alpha3 nAChR subunit exhibited spontaneous, correlated activity patterns that were similar to those observed in embryonic wild-type mice. In alpha3-/- and beta2-/- mice, the development and distribution of cholinergic neurons and processes and the density of retinal ganglion cells (RGCs) and the gross segregation of their dendrites into ON and OFF sublaminae were normal. However, the refinement of individual RGC dendrites is delayed. These results indicate that retinal waves mediated by nAChRs are involved in, but not required for, the development of neural circuits that define the ON and OFF sublamina of the inner plexiform layer.