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Transverse section showing the lens and the optic cup.

The eye develops from the neural tube, the epidermis, and the periocular mesenchyme, which receives contributions from both the neural crest and mesoderm lineages. This development is an example of sequential inductions where the organ is formed from three different tissues. First, there is an outpocketing of the neural tube called optic vesicles. The optic vesicles come into contact with the epidermis and induce the epidermis. The epidermis thickens to form the lens placode. The lens differientiates and invaginates until it pinches off from the epidermis. The lens acts as an inducer back to the optic vesicle to transform it into the optic cup and back to the epidermis to transform it into the cornea. The optic cup then delaminates into two layers: The neural retina and the retinal pigment epithelium. The periocular mesenchyme migrates in during the formation of the optic cup and is critical for the induction of the retinal pigment epithelium and the optic nerve. The mesenchyme contributes to the cornea, iris , ciliary body, sclera and blood vessels of the eye.

Only the epidermis in the head is competent to respond to the signal from the optic vesicles. Both the optic vesicle and the head epidermis are required for eye development. The competence of the head epidermis to respond to the optic vesicle signals comes from the expression of Pax6 in the epidermis. Pax6 is necessary and sufficient for eye induction. This competenece is acquired gradually during gastrulation and neurulation from interactions with the endoderm, mesoderm, and neural plate.

Sonic hedgehog reduces the expression of Pax6. When Shh is inhibited during development, the domain of expression for Pax6 is expanded and the eyes fail to separate causing cyclopia. Overexpression of Shh causes a loss of eye structures.