Previous work has shown that production of retinal ganglion cells is in part regulated by inhibitory factors secreted by ganglion cell themselves; however, the identities of these molecules are not known. Recent studies have demonstrated that the signaling molecule Sonic hedgehog (Shh) secreted by differentiated retinal ganglion cells is required to promote the progression of ganglion cell differentiation wave front and to induce its own expression. We present evidence that Shh signals play a role to negatively regulate ganglion cell genesis behind the differentiation wave front. Higher levels of Shh expression are detected behind the wave front as ganglion cells accumulate, while the Patched 1 receptor of Shh is expressed in adjacent retinal progenitor cells. Retroviral-mediated overexpression of Shh results in reduced ganglion cell proportions in vivo and in vitro. Conversely, inhibiting endogenous Shh activity by anti-Shh antibodies leads to an increased production of ganglion cells. Shh signals modulate ganglion cell production within the normal period of ganglion cell genesis in vitro without significantly affecting cell proliferation or cell death. Moreover, Shh signaling affects progenitor cell specification towards the ganglion cell fate during or soon after their last mitotic cycle. Thus, Shh derived from differentiated ganglion cells serves as a negative regulator behind the differentiation wave front to control ganglion cell genesis from the competent progenitor pool. Based on these results and other recent findings, we propose that Shh signals secreted by early-differentiated retinal neurons play dual roles at distinct concentration thresholds to orchestrate the progression of retinal neurogenic wave and the emergence of new neurons.