The limbal epithelium (LE), a circular and narrow epithelium that separates cornea from conjunctiva, harbors stem cells/progenitors in its basal layer that regenerate cornea. We have previously demonstrated that cells in the basal LE, when removed from their niche and cultured in reduced bond morphogenetic protein signaling, acquire properties of neural progenitors. Here, we demonstrate that LE-derived neural progenitors generate neurons with functional properties and can be directly differentiated along rod photoreceptor lineage in vitro and in vivo. These observations posit the LE as a potential source of neural progenitors for autologous cell therapy to treat photoreceptor degeneration in age-related macular degeneration and retinitis pigmentosa.