Acts as a transcriptional regulator through binding to DNA at the consensus sequence 5'-[TC]TAATT[AG][AG]-3' upstream of gene promoters (PubMed:17919464). Plays a significant role in the specification and morphogenesis of the sensory retina (PubMed:8630490). Mediates differentiation of V2a interneurons by repression of motor neuron gene transcription, via competitively binding to response elements that are activated by the ISL1-LHX3 complex, such as VSX1 (PubMed:17919464, PubMed:27477290). Acts as a positive transcriptional regulator of NXNL1; regulation is significantly increased in synergy with VSX1 (PubMed:19843539). Acts as a negative transcriptional regulator of MITF (PubMed:23028343). Represses SAG transcription by competitive inhibition of ISL1-LHX3 response elements (By similarity). Binds to the photoreceptor conserved element-1 (PCE-1) in the promoter of rod photoreceptor arrestin SAG and acts as a transcriptional repressor (PubMed:16236706). Involved in the development of retinal ganglion cells (RGCs) which leads to release of SHH by RGCs, promoting Hedgehog signaling and subsequent proliferation of retinal progenitor cells (PubMed:18417110). Participates in the development of the cells of the inner nuclear layer, by promoting postnatal differentiation of bipolar cells with a comparable inhibition of rod cell differentiation (PubMed:8630490, PubMed:16547132). May play a role in the maintenance of neural retina identity during development by regulation of canonical Wnt genes and CTNNB1 localization, suggesting a role in the regulation of canonical Wnt signaling (By similarity). Interacts with MITF. Expressed in the retina (at protein level) (PubMed:8630490, PubMed:16547132, PubMed:17919464, PubMed:18417110, PubMed:19843539, PubMed:23028343). Expressed throughout the anterior optic vesicle and all neuroblasts of the optic cup (at protein level) (PubMed:8630490). In the mature and postnatal retina is restricted to the inner nuclear layer, in which its expression decreases from the outer to the inner margin (at protein level) (PubMed:8630490, PubMed:17919464, PubMed:19843539). Also detected in regions of the developing thalamus, hindbrain, and ventral spinal cord (PubMed:8630490). Detected by embryonic day 25, by which time the optic cup has formed and the ganglion cell layer can be distinguished. A rapid increase to levels 3- to 4-fold greater than those seen in adult retina occurs in the period from birth (P0) to postnatal day 6 (P6). During this interval, the horizontal, bipolar, amacrine, and cone cells arise from the neuroretinal layer, the inner nuclear layer, and outer nuclear layer separate, and the outer plexiform layer begins to form. Levels begin to decrease by P8, when the rod outer segments are Still differentiating, and reaches its lowest levels in adult retina. Defects in Vsx2 are the cause of ocular retardation (OR(J)), a mouse disease characterized by microphthalmia, progressive destruction of the retina, and absence of the optic nerve. The OR(J) mutation is due to an OCHR (STOP) mutation. RNAi-mediated knockdown in the retina of newborn mice results in an increase in the number of photoreceptor cells as a result of a decrease in the number of bipolar cells and a comparable increase in rod cells at postnatal day 21. Belongs to the paired homeobox family.