Retinal organoids (ROs) are three-dimensional retinal tissues, which are differentiated in vitro from induced pluripotent stem cells (iPSC), ultimately forming all main retinal cell types under defined culture conditions. ROs show several highly specialized retinal features, including the outgrowth of photoreceptor outer segments (OSs). In vivo, the photoreceptor OSs are enveloped and maintained by protrusions of retinal pigment epithelium (RPE) cells, the so-called apical microvilli, while ROs fail to recapitulate this critical interaction in culture development. Here, we define specific co-culture conditions aiming to compensate for the missing physical proximity of RPE and OSs in RO development. Accordingly, functional RPE cells and ROs were differentiated simultaneously from the same iPSC clone, the former resulting in byproduct RPE or bRPE cells. While some co-culture approaches indicated a temporary functional interaction between bRPE and RO photoreceptors, they did not improve the photoreceptor histoarchitecture. In contrast, embedding ROs in a basement membrane extract without bRPE cells showed a robust improvement in the rate of photoreceptor OS retention. RO embedding is a quick and easy method that greatly enhances the preservation of photoreceptor OSs, an important structure for modelling retinal diseases with the involvement of photoreceptors.