Paclobutrazol (PBZ) is a widely used fungicide that shows toxicity to aquatic embryos, probably through rain-wash. Here, we specifically focus on its toxic effect on eye development in zebrafish, as well as the role of retinoic acid (RA), a metabolite of vitamin A that controls proliferation and differentiation of retinal photoreceptor cells, in this toxicity. Embryos were exposed to PBZ with or without RA from 2 to 72 h post-fertilization (hpf), and PBZ-treated embryos (2–72 hpf) were exposed to RA for additional hours until 120 hpf. Eye size and histology were examined. Expression levels of gnat1 (rod photoreceptor marker), gnat2 (cone photoreceptor marker), aldehyde dehydrogenases (encoding key enzymes for RA synthesis), and phospho-histone H3 (an M-phase marker) in the eyes of control and treated embryos were examined. PBZ exposure dramatically reduces photoreceptor proliferation, thus resulting in a thinning of the photoreceptor cell layer and leading to a small eye. Co-treatment of PBZ with RA, or post-treatment of PBZ-treated embryos with RA, partially rescues photoreceptor cells, revealed by expression levels of marker proteins and by retinal cell proliferation. PBZ has strong embryonic toxicity to retinal photoreceptors, probably via suppressing the production of RA, with effects including impaired retinal cell division.