Visual System Homeobox 2 (Vsx2) is a transcription factor expressed in the developing retina that regulates tissue identity, growth, and fate determination. Several mutations in the Vsx2 gene exist in mice, including a spontaneous nonsense mutation and two targeted missense mutations originally identified in humans. Here, we expand the genetic repertoire to include a LacZ reporter allele (Vsx2 (LacZ) ) designed to express beta-Galactosidase (b-GAL) and simultaneously disrupt Vsx2 function (knock-in/knock-out). The retinal expression pattern of b-GAL is concordant with VSX2, and the mutant allele is recessive. Vsx2 (LacZ) homozygous mice have congenital bilateral microphthalmia accompanied by defects in retinal development including ectopic expression of non-retinal genes, reduced proliferation, delayed neurogenesis, aberrant tissue morphology, and an absence of bipolar interneurons - all hallmarks of Vsx2 loss-of-function. Unexpectedly, the mutant VSX2 protein is stably expressed, and there are subtle differences in eye size and early retinal neurogenesis when compared to the null mutant, ocular retardation J. The perdurance of the mutant VSX2 protein combined with subtle deviations from the null phenotype leaves open the possibility that Vsx2 (LacZ) allele is not a complete knock-out. The Vsx2 (LacZ) allele exhibits loss-of-function characteristics and adds to the genetic toolkit for understanding Vsx2 function.