The neuropeptide, N-acetylaspartylglutamate (NAAG), was identified in the chick retina (1.4 nmol/retina) by HPLC, radioimmunoassay and immunohistochemistry. This acidic dipeptide was found within retinal ganglion cell bodies and their neurites in the optic fibre layer of the retina. Substantial, but less intense, immunoreactivity was detected in many amacrine-like cells in the inner nuclear layer and in multiple bands within the inner plexiform layer. In addition, NAAG immunoreactivity was observed in the optic fibre layer and in the neuropil of the superficial layers of the optic tectum, as well as in many cell bodies in the tectum. Using a newly developed, specific and highly sensitive (3 fmol/50 μI) radioimmunoassay for NAAG, peptide release was detected in isolated retinas upon depolarization with 55 mM extracellular potassium. This assay also permitted detection of peptide release from the optic tectum following stimulation of action potentials in retinal ganglion cell axons of the optic tract. Both of these release processes required the presence of extracellular calcium. Electrically stimulated release from the tectum was reversibly blocked by extracellular cadmium. These findings suggest that NAAG serves an extracellular function following depolarization-induced release from retinal amacrine neurons and from ganglion cell axon endings in the chick optic tectum. These data support the hypothesis that NAAG functions in synaptic communication between neurons in the visual system.