The transcription factor Sox2 is active in neural stem cells, and Sox2 'knockdown' mice show defects in neural stem/progenitor cells in the hippocampus and eye, and possibly some neurons. In humans, heterozygous Sox2 deficiency is associated with eye abnormalities, hippocampal malformation and epilepsy. To better understand the role of Sox2, we performed in vitro differentiation studies on neural stem cells cultured from embryonic and adult brains of 'knockdown' mutants. Sox2 expression is high in undifferentiated cells, and declines with differentiation, but remains visible in at least some of the mature neurons. In mutant cells, neuronal, but not astroglial, differentiation was profoundly affected. beta-Tubulin-positive cells were abundant, but most failed to progress to more mature neurons, and showed morphological abnormalities. Overexpression of Sox2 in neural cells at early, but not late, stages of differentiation, rescued the neuronal maturation defect. In addition, it suppressed GFAP expression in glial cells. Our results show an in vitro requirement for Sox2 in early differentiating neuronal lineage cells, for maturation and for suppression of alternative lineage markers. Finally, we examined newly generated neurons from Sox2 ;knockdown' newborn and adult mice. GABAergic neurons were greatly diminished in number in newborn mouse cortex and in the adult olfactory bulb, and some showed abnormal morphology and migration properties. GABA deficiency represents a plausible explanation for the epilepsy observed in some of the knockdown mice, as well as in SOX2-deficient individuals.