The tailless (tlx) gene is a forebrain-restricted transcription factor. Tlx mutant animals exhibit a reduction in the size of the cerebral hemispheres and associated structures . Superficial cortical layers are specifically reduced, whereas deep layers are relatively unaltered . To determine whether the adult laminar phenotype has a developmental etiology and whether it is associated with a change in proliferation/differentiation decisions, we examined the cell cycle and neurogenesis in the embryonic cortex. We found that there is a temporal and regional requirement for the Tlx protein in progenitor cells (PCs). Neurons prematurely differentiate at all rostrocaudal levels up to mid-neurogenesis in mutant animals. Heterozygote animals have an intermediate phenotype indicating there is a threshold requirement for Tlx in early cortical neurogenesis. Our studies indicate that PCs in the ventricular zone are sensitive to loss of Tlx in caudal regions only; however, PCs in the subventricular zone are altered at all rostrocaudal levels in tlx-deficient animals. Furthermore, we found that the cell cycle is shorter from embryonic day 9.5 in tlx^–/– embryos. At mid-neurogenesis, the PC population becomes depleted, and late PCs have a longer cell cycle in tlx-deficient animals. Consequently, later generated structures, such as upper cortical layers, the dentate gyrus, and the olfactory bulbs, are severely reduced. These studies indicate that tlx is an essential intrinsic regulator in the decision to proliferate or differentiate in the developing forebrain.