The orientation of visual stimuli is a salient feature of visual scenes. In vertebrates, the first neural processing steps generating orientation selectivity take place in the retina. Here, we dissect an orientation-selective circuit in the larval zebrafish retina and describe its underlying synaptic, cellular, and molecular mechanisms. We genetically identify a class of amacrine cells (ACs) with elongated dendritic arbors that show orientation tuning. Both selective optogenetic ablation of ACs marked by the cell-adhesion molecule Teneurin-3 (Tenm3) and pharmacological interference with their function demonstrate that these cells are critical components for orientation selectivity in retinal ganglion cells (RGCs) by being a source of tuned GABAergic inhibition. Moreover, our morphological analyses reveal that Tenm3(+) ACs and orientation-selective RGCs co-stratify their dendrites in the inner plexiform layer, and that Tenm3(+) ACs require Tenm3 to acquire their correct dendritic stratification. Finally, we show that orientation tuning is present also among bipolar cell presynaptic terminals. Our results define a neural circuit underlying orientation selectivity in the vertebrate retina and characterize cellular and molecular requirements for its assembly.