TLX is an orphan nuclear receptor that is expressed exclusively in vertebrate forebrains. Although TLX is known to be expressed in embryonic brains, the mechanism by which it influences neural development remains largely unknown. We show here that TLX is expressed specifically in periventricular neural stem cells in embryonic brains. Significant thinning of neocortex was observed in E14.5 TLX-null brains with reduced nestin labeling and decreased cell proliferation in the germinal zone. Cell cycle analysis revealed both prolonged cell cycles and increased cell cycle exit in TLX-null embryonic brains. Increased expression of a cyclin-dependent kinase inhibitor p21 and decreased expression of cyclin D1 provide a molecular basis for the deficiency of cell cycle progression in embryonic brains of TLX-null mice. Furthermore, transient knockdown of TLX by in utero electroporation led to precocious cell cycle exit and differentiation of neural stem cells followed by outward migration. Together these results indicate that TLX plays an important role in neural development by regulating cell cycle progression and exit of neural stem cells in the developing brain.