The visual responses of vertebrates are sensitive to the overall composition of retinal interneurons including amacrine cells, which tune the activity of the retinal circuitry. The expression of Paired-homeobox 6 (PAX6) is regulated by multiple cis-DNA elements including the intronic alpha-enhancer, which is active in GABAergic amacrine cell subsets. Here, we report that the transforming growth factor beta 1-induced transcript 1 protein (Tgfb1i1) interacts with the LIM domain transcription factors Lhx3 and Isl1 to inhibit the a-enhancer in the post-natal mouse retina. Tgfb1i1(-/-) mice show elevated a-enhancer activity leading to overproduction of Pax6 Delta PD isoform that supports the GABAergic amacrine cell fate maintenance. Consequently, the Tgfb1i1(-/-) mouse retinas show a sustained light response, which becomes more transient in mice with the auto-stimulation-defective Pax6(Delta PBS/Delta PBS) mutation. Together, we show the antagonistic regulation of the a-enhancer activity by Pax6 and the LIM protein complex is necessary for the establishment of an inner retinal circuitry, which controls visual adaptation.