During development of the mammalian cerebral cortex neural stem cells (NSC) first generate neurons and subsequently produce glial cells. The mechanism(s) responsible for this developmental shift from neurogenesis to gliogenesis is unknown. Brain-derived neurotrophic factor (BDNF) is believed to play important roles in the development of the mammalian cerebral cortex; it enhances neurogenesis and promotes the differentiation and survival of newly generated neurons. Here, we provide evidence that a truncated form of the BDNF receptor tyrosine kinase B (trkB-t) plays a pivotal role in directing embryonic mouse cortical NSC to a glial cell fate. Expression of trkB-t promotes differentiation of NSC toward astrocytes while inhibiting neurogenesis both in cell culture and in vivo. The mechanism by which trkB-t induces astrocyte genesis is not simply the result of inhibition of full-length receptor with intrinsic tyrosine kinase activity signaling. Instead, binding of BDNF to trkB-t activates a signaling pathway (involving a G-protein and protein kinase C) that induced NSC to become glial progenitors and astrocytes. Thus, the increased expression of trkB-t in the embryonic cerebral cortex that occurs coincident with astrocyte production plays a pivotal role in the developmental transition from neurogenesis to gliogenesis. Our findings suggest a mechanism by which a single factor (BDNF) regulates the production of the two major cell types in the mammalian cerebral cortex.