Ephrin-B plays an important role in neural progenitor cells to regulate self-renewal and differentiation. Cellular and embryological evidence suggest this function of ephrin-B is mediated through a PDZ-dependent reverse signaling mechanism. Here, we have genetically investigated the function of PDZ-RGS3, a proposed downstream signaling mediator of ephrin-B function, and found that knockout of PDZ-RGS3 caused early cell cycle exit and precocious differentiation in neural progenitor cells of the developing cerebral cortex, reminiscent of the phenotype observed in ephrin-B1 knockout mice. This resulted in a loss of cortical neural progenitor cells during cortical neurogenesis and led to impairment in the production of late born cortical neurons. These results reveal an essential role of PDZ-RGS3 in maintaining the balance between self-renewal and differentiation of neural progenitor cells and provide genetic evidence linking PDZ-RGS3 to ephrin-B reverse signaling. As ephrin-B molecules are often differentially expressed in different types of neural progenitor/stem cells during development or in adult life, deletion of PDZ-RGS3 can achieve a uniform loss of function of the ephrin-B/regulator of G protein-signaling (RGS) pathway, thereby providing a genetic tool useful for dissecting the mechanisms and functions of the ephrin-B/RGS reverse signaling pathway in neural progenitor/stem cell regulation.