Duplication of MECP2 (Methyl-CpG-binding protein 2) causes severe mental illness called MECP2 duplication syndrome (MDS), yet the underlying mechanism remains elusive. Here we show, in Tg(MECP2) transgenic mouse brain or cultured neural progenitor cells (NPCs), that elevated MeCP2 expression promotes NPC differentiation into neurons. Ectopic expression of MeCP2 inhibits ADAM10 and thus the NOTCH pathway during NPC differentiation. In human cells, this downregulation on ADAM10 was mediated by miRNA-197, which is upregulated by MeCP2. Surprisingly, miR-197 binds to the ADAM10 3'-UTR via its 3' side, not the canonical seed sequence on the 5' side. In mouse cells, a noncoding RNA Gm28836 is used to replace the function of miR-197 between MeCP2 and ADAM10. Similar to MeCP2, overexpressing miR-197 also promotes NPCs differentiation into neurons. Interestingly, three rare missense mutations (H371R, E394K, and G428S) in MECP2, which we identified in a Han Chinese autism spectrum disorders (ASD) cohort showed loss-of-function effects in NPC differentiation assay. These mutations cannot upregulate miR-197. Overexpressing miR-197 together with these MeCP2 mutations could rescue the downregulation on ADAM10. Not only the inhibitor of miR-197 could reverse the effect of overexpressed MeCP2 on NPCs differentiation, but also overexpression of miR-197 could reverse the NPCs differentiation defects caused by MECP2 mutations. Our results revealed that a regulatory axis involving MeCP2, miR-197, ADAM10, and NOTCH signaling is critical for NPC differentiation, which is affected by both MeCP2 duplication and mutation.