This paper describes the early morphological and physiological development of pyramidal neurons in layer 5 of the rat visual cortex in relation to the targets chosen by their axons. Cells were prelabeled by retrograde transport from the superior colliculus or the contralateral visual cortex and intracellularly injected either in fixed slices or after recording in living slices. In the adult, corticotectal cells have thick apical dendrites with an extensive terminal arborization extending into layer 1, and fire characteristic bursts of action potentials when injected with a depolarizing current; interhemispheric cells have slender apical dendrites that terminate without a terminal tuft, usually in layer 2/3, and they display a more regular firing pattern (Kasper et al.: J Comp Neurol, this issue, 339:459-474). At embryonic day E18 (when axons of the two classes of cells are already taking different routes towards their targets) and E21, pyramidal-like cells throughout the cortical plate all have similar soma-dendritic morphology, with spindle-shaped cell bodies and few, short basal dendrites but apical dendrites that all end in distinct tufts in the marginal zone. At postnatal day P3, after the axons of both cell classes have reached their targets, all pyramidal neurons in layer 5 still have distinct terminal arborizations in layer 1, though they vary in complexity and extent. The somata are now more mature (round to ovoid in shape), and the basal dendritic tree has extended. As early as P5, all cells studied could be clearly classified as tufted or untufted (considerably earlier than previously reported; Koester and O'Leary: J Neurosci 12:1382, '92), and these features correlated precisely with the projection target, as in the adult. Measurement showed that although interhemispheric cells lose their terminal tufts, in general the trunks of their apical dendrites do not withdraw but continue to grow, at roughly the same rate as those of corticotectal cells. The two classes of layer 5 pyramidal neurons differentiate from each other in three distinct phases: pathway selection by axons precedes the loss of the apical tuft by interhemispheric cells, and these morphological characteristics are established 10 days before the onset of burst-firing in corticotectal cells. These three steps may be guided by different molecular signals.