The eyes of most diurnal reptiles and birds contain coloured retinal filters—oil droplets. Although these filters are widespread, their adaptive advantage remains uncertain. To understand why coloured oil droplets appeared and were retained during evolution, I consider both the benefits and the costs of light filtering in the retina. Oil droplets decrease cone quantum catch and reduce the overlap in sensitivity between spectrally adjacent cones. The reduction of spectral overlap increases the volume occupied by object colours in a cone space, whereas the decrease in quantum catch increases noise, and thus reduces the discriminability of similar colours. The trade–off between these two effects determines the total benefit of oil droplets. Calculations show that coloured oil droplets increase the number of object colours that can be discriminated, and thus are beneficial for colour vision.