Using genetic, biochemical and cell biological methods, we are addressing two fundamental questions in developmental biology: what are the mechanisms that govern the generation of individual cell lineages, and how do cell lineages come together to form a functioning organ? We focus our studies on the eye and analyze how the multipotential optic neuroepithelium establishes its individual domains, namely retina, retinal pigment epithelium (RPE), iris, and optic nerve. We also analyze how neural crest-derived pigment cells (melanocytes) develop and migrate towards the eye to provide important light-absorbing properties in iris and choroid. Interestingly, both the domain specification in the neuroepithelium and the development of melanocytes in the neural crest depend on the same transcription factor, MITF. MITF is encoded by a gene with multiple promoters that give rise to various mRNA and protein isoforms. This multitude of isoforms, compounded by the fact that MITF binds DNA only as a homo- or heterodimer, theoretically allows for the formation of a large number of different dimers, each potentially with distinct functions. We found, however, that the developing RPE expresses predominantly a single protein isoform, called B-MITF, and that choroidal melanocytes predominantly express another isoform, M-MITF. Moreover, we found that in the RPE, the expression of B-MITF is controlled mostly by one of three possible promoters. This promoter contains putative binding sites for transcription factors that promote RPE development and, based on its specific deletion in knockout mice, is the major target of negative regulators that promote retinal development at the expense of RPE. In addition to its regulation at the transcriptional level, MITF is also regulated by post-translational modifications, including sumoylations, acetylations and phosphorylations that may modify its interactions with transcriptional co-regulators. We found that targeted mutations in a phosphorylation site common to both B- and M-MITF affect pigment cell proliferation and differentiation, but only in the neural crest and not the RPE. These and additional mutational and biochemical studies highlight the importance of distinct transcription factor isoforms and provide a detailed insight into isoform-specific transcriptional networks that operate during eye development.