The precise lineage between neural stem cells and mature astrocytes remains poorly defined. To examine astrocyte development, we have characterized glial precursors from neural tissue derived from early embryonic ages. We show that CD44 identifies an astrocyte-restricted precursor cell (ARP) that is committed to generating astrocytes in vitro and in vivo in both rodent and human tissue. CD44+ cells arise later in development than neuronal-restricted precursors (NRPs) or tripotential glial-restricted precursors (GRPs). ARPs are distinguished from GRP and NRP cells by their antigenic profile and differentiation ability. ARPs can be generated from GRP cells in mass or clonal cultures and in vivo after transplantation, suggesting a sequential differentiation of neuroepithelial stem cells (NEPs) to GRPs to ARPs and then to astrocytes. The properties of ARPs are different from other astrocyte precursors described previously in their expression of CD44 and S-100beta and absence of other lineage markers. Using a CD44 misexpression transgenic mouse model (CNP-CD44 mouse), we show that CD44 overexpression in vivo and in vitro decreases the number of mature glia and increases the number of O4+/GFAP+ cells tenfold. Misexpression of CD44 in culture inhibits oligodendrocytes and arrests cells at the precursor state. In summary, our data provide strong evidence for the existence of a CD44+ ARP in the developing nervous system.