Inducing a stable and predictable program of neural cell fate in pluripotent cells in vitro is an important goal for utilizing these cells for modeling human disease mechanisms. However, the extent to which in vitro neural specification recapitulates in vivo neural specification remains to be fully established. We previously demonstrated that in the mouse embryo, activation of fibroblast growth factor (FGF) signalling promotes definitive neural stem cell (NSC) development through the upregulation of the transcription factor Zfhx1b. Here, we asked whether Zfhx1b is similarly required during neural lineage development of embryonic stem (ES) cells. Zfhx1b gene expression is rapidly upregulated in mouse ES cells cultured in a permissive neural-inducing environment, compared to ES cells in a standard pluripotency maintenance environment, and is potentiated by FGF signalling. However, overexpression of Zfhx1b in ES cells in maintenance conditions, containing serum and leukemia inhibitory factor (LIF), is sufficient to induce Sox1 expression, a marker found in neural precursors and to promote definitive NSC colony formation. Knockdown of Zfhx1b in ES cells using siRNA did not affect the initial transition of ES cells to a neural cell fate, but did diminish the ability of these neural cells to develop further into definitive NSCs. Thus, our findings using ES cells are congruent with evidence from mouse embryos and support a model, whereby intercellular FGF signaling induces Zfhx1b, which promotes the development of definitive NSCs subsequent to an initial neural specification event that is independent of this pathway.