The remains include an early form of the eye seen in many of today's animals, including crabs, bees and dragonflies, researchers said.
Scientists, including those from the University of Edinburgh in the UK, made the finding while examining the well-preserved fossil of a hard-shelled species - called a trilobite.
These ancestors of spiders and crabs lived in coastal waters during the Palaeozoic era, between 541-251 million years ago, researchers said.
They found the ancient creature had a primitive form of compound eye - an optical organ that consists of arrays of tiny visual cells, called ommatidia, similar to those of present-day bees.
The findings, published in the journal PNAS, suggest that compound eyes have changed little over 500 million years.
The right eye of the fossil - which was unearthed in Estonia - was partly worn away, giving researchers a clear view inside the organ.
This revealed details of the eye's structure and function, and how it differs from modern compound eyes.
The species had poor vision compared with many animals today, but it could identify predators and obstacles in its path, researchers said.
Unlike modern compound eyes, the fossil's eye does not have a lens. This is likely because the primitive species - called Schmidtiellus reetae - lacked parts of the shell needed for lens formation.
The team also revealed that only a few million years later, improved compound eyes with higher resolution developed in another trilobite species from the present-day Baltic region.
"This exceptional fossil shows us how early animals saw the world around them hundreds of millions of years ago," said Professor Euan Clarkson, from the University of Edinburgh.
"Remarkably, it also reveals that the structure and function of compound eyes has barely changed in half a billion years," said Clarkson.
"This may be the earliest example of an eye that it is possible to find," said Professor Brigitte Schoenemann, of the University of Cologne in Germany.
"Older specimens in sediment layers below this fossil contain only traces of the original animals, which were too soft to be fossilised and have disintegrated over time," said Schoenemann.
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