The number of proliferating cells in the rodent retina declines dramatically after birth. To determine if extrinsic factors in the retinal micro-environment are responsible for this decline in proliferation, we established cultures of retinal progenitors or Muller glia, and added dissociated retinal neurons from older retinas. The older cells inhibited proliferation of progenitor cells and Muller glia. When these experiments were performed in the presence of TGF(beta)RII-Fc fusion protein, an inhibitor of TGF(beta) signaling, proliferation was restored. This suggests a retina-derived TGF(beta) signal is responsible for the developmental decline in retinal proliferation. TGFbeta receptors I and II are expressed in the retina and are located in nestin-positive progenitors early in development and glast-positive Muller glia later in development. RT-PCR and immunofluorescence data show TGF(beta)2 is the most highly expressed TGF(beta)ligand in the postnatal retina, and it is expressed by inner retinal neurons. Addition of either TGF(beta)1 or TGF(beta)2 to postnatal day 4 retinas significantly inhibited progenitor proliferation, while treatment of explanted postnatal day 6 retinas with TGF(beta) signaling inhibitors resulted in increased proliferation. Last, we tested the effects of TGF(beta) in vivo by injections of TGF(beta) signaling inhibitors: when TGF(beta) signaling is inhibited at postnatal day 5.5, proliferation is increased in the central retina; and when co-injected with EGF at postnatal day 10, TGF(beta)inhibitors stimulate Muller glial proliferation. In sum, these results show that retinal neurons produce a cytostatic TGF(beta) signal that maintains mitotic quiescence in the postnatal rat retina.