Optic fissure fusion is a critical event during retinal development. Failure of fusion leads to coloboma, a potentially blinding congenital disorder. Pax2a is an essential regulator of optic fissure fusion and the target of numerous morphogenetic pathways. In our current study, we examined the negative regulator of expression, Nz2, and the mechanism modulating Nlz2 activity during optic fissure fusion. Upregulation of Nlz2 in zebrafish embryos resulted in downregulation of expression and fissure fusion failure. Conversely, upregulation of expression also led to fissure fusion failure suggesting Pax2 levels require modulation to ensure proper fusion. Interestingly, we discovered Nlz2 is a target of the E3 ubiquitin ligase Siah. We show that zebrafish expression is regulated by Hedgehog signaling and that Siah1 can directly target Nlz2 for proteasomal degradation, in turn regulating the levels of mRNA. Finally, we show that both activation and inhibition of Siah activity leads to failure of optic fissure fusion dependent on ubiquitin-mediated proteasomal degradation of Nlz2. In conclusion, we outline a novel, proteasome-mediated degradation regulatory pathway involved in optic fissure fusion.