The development of the vertebrate brain involves the creation of many cell types in precise locations and at precise times, followed by the formation of functional connections. To generate its cells in the correct numbers, the brain has to produce many precursors during a limited period. How this is achieved remains unclear, although several cytokines have been implicated in the proliferation of neural precursors. Understanding this process will provide profound insights, not only into the formation of the mammalian brain during ontogeny, but also into brain evolution. Here we review the role of the Sonic hedgehog-Gli pathway in brain development. Specifically, we discuss the role of this pathway in the cerebellar and cerebral cortices, and address the implications of these findings for morphological plasticity. We also highlight future directions of research that could help to clarify the mechanisms and consequences of Sonic hedgehog signalling in the brain.