The isolated Bulla eye expresses a circadian rhythm in optic nerve impulse frequency. In an effort to learn more about the organization of the Bulla retina and, specifically, about the organization of retinal elements involved in the circadian pacemaker system, both intracellular and extracellular recordings from retinal cells, and thick sections and scanning electron micrographs of the eye were examined. The Bulla retina contains .apprx. 1000 large photoreceptors with distinct villous-bearing distal segments which form a layer around a solid lens. There is also a population of .apprx. 100 neurons which surround a neuropil at the base of the retina. Electrical activity in the optic nerve consists of large compound action potentials and lower amplitude activity. Compound action potentials occur spontaneously in darkness and both types of optic nerve activities can be induced by light pulses. Intracellular recording from the photoreceptor layer reveals 4 types of responses; cells which depolarize in response to a light pulse and then transiently hyperpolarize before returning to resting levels, cells which depolarize and then return to resting levels without a hyperpolarization, spontaneously active cells which transiently hyperpolarize and then depolarize during a light pulse and cells which depolarize upon illumination with the production of action potentials. Intracellular recording from cells at the base of the retina reveals neurons which are spontaneously active and fire action potentials in exact synchrony with compound impulses in the optic nerve. These basal retinal neurons are electrically coupled to one another and are responsible for the compound optic nerve impulse. The most common type of photoreceptors (R-tpe) are electrically coupled to one another but no evidence is found that these photoreceptors make contact with basal retinal neurons. Localized illumination of retinal layers with miniature light guides reveals that the photoreceptor layer is responsible for light-induced low amplitude optic nerve impulses. The light-induced compound action potential response is generated by light sensitive neurons at the retinal base. The photoreceptor layer exerts an inhibitory effect on basal retinal neurons. Illumination of the photoreceptor layer leads to a hyperpolarization in basal retinal neuron membrane potential. This inhibition probably is mediated by a particular class of retinal cells, similar to H-type cells in the Aplysia retina. An explicit model for the organization of the Bulla retina is proposed.