Radial glial cells and astrocytes function to support the construction and maintenance, respectively, of the cerebral cortex. However, the mechanisms that determine how radial glial cells are established, maintained, and transformed into astrocytes in the cerebral cortex are not well understood. Here, we show that neuregulin-1 (NRG-1) exerts a critical role in the establishment of radial glial cells. Radial glial cell generation is significantly impaired in NRG mutants, and this defect can be rescued by exogenous NRG-1. Down-regulation of expression and activity of erbB2, a member of the NRG-1 receptor complex, leads to the transformation of radial glial cells into astrocytes. Reintroduction of erbB2 transforms astrocytes into radial glia. The activated form of the Notch1 receptor, which promotes the radial glial phenotype, activates the erbB2 promoter in radial glial cells. These results suggest that developmental changes in NRG-1-erbB2 interactions modulate the establishment of radial glia and contribute to their appropriate transformation into astrocytes.