Yap functions as a transcriptional regulator by acting together with sequence-specific DNA binding factors and transcription cofactors to mediate cell proliferation in developing epithelial tissues and tumors. An upstream kinase cascade controls nuclear localization and function in response to partially identified exogenous signals, including cell-to-cell contact. Nevertheless, its role in CNS development is poorly understood. In order to investigate Yap function in developing CNS, we characterized the cellular outcomes after selective Yap gene ablation in developing ocular tissues. When Yap was lost, presumptive retinal pigment epithelium acquired anatomical and molecular characteristics resembling those of the retinal epithelium rather than of RPE, including loss of pigmentation, pseudostratified epithelial morphology and ectopic induction of markers for retinal progenitor cells, like Chx10, and neurons, like β-Tubulin III. In addition, developing retina showed signs of progressive degeneration, including laminar folding, thinning and cell loss, which resulted from multiple defects in cell proliferation and survival, and in junction integrity. Furthermore, Yap-deficient retinal progenitors displayed decreased S-phase cells and altered cell cycle progression. Altogether, our studies not only illustrate the canonical function of Yap in promoting the proliferation of progenitors, but also shed new light on its evolutionarily conserved, instructive role in regional specification, maintenance of junctional integrity and precise regulation of cell proliferation during neuroepithelial development.