Neurons and astrocytes are generated from common neural precursors, yet neurogenesis precedes astrocytogenesis, which normally commences at later stages of development. We have previously reported that a particular cytosine residue within a STAT3-binding site in the astrocyte-specific marker glial fibrillary acidic protein (GFAP) gene promoter becomes demethylated in neuroepithelial cells as gestation proceeds. This demethylation correlates tightly with the onset of astrocyte differentiation, suggesting that a change in DNA methylation at cell-type-specific gene promoters controls the switch from neurogenesis to astrocytogenesis in the developing brain. Here, we show that late-gestation neuroepithelial cells, which have already lost the methylation in the STAT3-binding site within the GFAP promoter, can still give rise to neurons and that these neurons do not respond to a STAT3-activating cytokine to express GFAP. Members of a transcriptional repressor family, the methylated-CpG binding proteins (MBDs), including MeCP2, are predominantly expressed in neurons, and ectopic MeCP2 expression inhibited astrocyte differentiation of neuroepithelial cells. Moreover, we found that exon 1 of the GFAP gene remains hypermethylated even in neuroepithelial cells at a late developmental stage and in neurons differentiated from such neuroepithelial cells. We further demonstrate that MeCP2 actually binds to the highly methylated exon 1 of the GFAP gene in neurons. These results suggest that region-specific DNA methylation and MBDs play an important role in the regulation of differentiation plasticity in neurons.