Stem cells are crucial for normal development and homeostasis, and their misbehavior may be related to the origin of cancer. Progress in these areas has been difficult because the mechanisms regulating stem cell lineages are not well understood. Here, we have investigated the role of the SHH-GLI pathway in the developing mouse neocortex. The results show that SHH signaling endogenously regulates the number of embryonic and postnatal mouse neocortical cells with stem cell properties, and controls precursor proliferation in a concentration-dependent manner in cooperation with EGF signaling. These findings identify a crucial mechanism for the regulation of the number of cells with stem cell properties that is unexpectedly conserved in different stem cell niches.