We generated mice with a null mutation of the forebrain-restricted transcription factor BF-1 to examine its function in brain development. Heterozygous animals have an apparently normal phenotype. Homozygous null BF-1 mutants die at birth and have a dramatic reduction in the size of the cerebral hemispheres. The development of the ventral telencephalon is more severely affected than that of the dorsal telencephalon. Telencephalic neuroepithelial cells are specified in the BF-1 mutant, but their proliferation is reduced. Dorsal telencephalic neuroepithelial cells also differentiate prematurely, leading to early depletion of the progenitor population. These results suggest that BF-1 controls the morphogenesis of the telencephalon by regulating the rate of neuroepithelial cell proliferation and the timing of neuronal differentiation.