We have isolated the embryonic lethal gene muscleblind (mbl) as a suppressor of the sev-svp2 eye phenotype. Analysis of clones mutant for mbl during eye development shows that it is autonomously required for photoreceptor differentiation. Mutant cells are recruited into developing ommatidia and initiate neural differentiation, but they fail to properly differentiate as photoreceptors. Molecular analysis reveals that the mbl locus is large and complex, giving rise to multiple different proteins with common 5' sequences but different carboxy termini. Mbl proteins are nuclear and share a Cys3His zinc-finger motif which is also found in the TIS11/NUP475/TTP family of proteins and is highly conserved in vertebrates and invertebrates. Functional analysis of mbl, the observation that it also dominantly suppresses the sE-Jun(Asp) gain-of-function phenotype and the phenotypic similarity to mutants in the photoreceptor-specific glass gene suggest that mbl is a general factor required for photoreceptor differentiation.