Overexpression of beta-catenin, a protein that functions in both cell adhesion and signaling, causes expansion of the cerebral cortical precursor population and cortical surface area enlargement. Here, we find that focal elimination of beta-catenin from cortical neural precursors in vivo causes premature neuronal differentiation. Precursors within the cerebral cortical ventricular zone exhibit robust beta-catenin-mediated transcriptional activation, which is downregulated as cells exit the ventricular zone. Targeted inhibition of beta-catenin signaling during embryonic development causes cortical precursor cells to prematurely exit the cell cycle, differentiate into neurons, and migrate to the cortical plate. These results show that beta-catenin-mediated transcriptional activation functions in the decision of cortical ventricular zone precursors to proliferate or differentiate during development, and suggest that the cell-autonomous signaling activity of beta-catenin can control the production of cortical neurons and thus regulate cerebral cortical size.