Neurogenesis in the zebrafish retina occurs in several waves of differentiation. The first neurogenic wave generates ganglion cells and depends on hedgehog (hh) signaling activity. Using transgenic zebrafish embryos that express GFP under the control of the sonic hedgehog (shh) promoter, we imaged the differentiation wave in the retina and show that, in addition to the wave in the ganglion cell layer, shh expression also spreads in the inner nuclear layer. This second wave generates amacrine cells expressing shh, and although it overlaps temporally with the first wave, it does not depend on it, as it occurs in the absence of ganglion cells. We also show that differentiation of cell types found in the inner and outer nuclear layers, as well as lamination of the retina, depends on shh. By performing mosaic analysis, we demonstrate that Shh directs these events as a short-range signal within the neural retina.