The transcriptional events that lead to the cessation of neural proliferation, and therefore enable the production of proper numbers of differentiated neurons and glia, are still largely uncharacterized. Here, we report that the transcription factor Insulinoma-associated 1 (INSM1) forms complexes with RE1 Silencing Transcription factor (REST) corepressors RCOR1 and RCOR2 in progenitors in embryonic mouse brain. Mice lacking both RCOR1 and RCOR2 in developing brain die perinatally and generate an abnormally high number of neural progenitors at the expense of differentiated neurons and oligodendrocyte precursor cells. In addition, Rcor1/2 deletion detrimentally affects complex morphological processes such as closure of the interganglionic sulcus. We find that INSM1, a transcription factor that induces cell-cycle arrest, is coexpressed with RCOR1/2 in a subset of neural progenitors and forms complexes with RCOR1/2 in embryonic brain. Further, the Insm1 −/− mouse phenocopies predominant brain phenotypes of the Rcor1/2 knockout. A large number of genes are concordantly misregulated in both knockout genotypes, and a majority of the down-regulated genes are targets of REST. Rest transcripts are up-regulated in both knockouts, and reducing transcripts to control levels in the Rcor1/2 knockout partially rescues the defect in interganglionic sulcus closure. Our findings indicate that an INSM1/RCOR1/2 complex controls the balance of proliferation and differentiation during brain development.he development of the nervous system is an intricately orchestrated series of events beginning with formation of neuroepithelia. Progenitors that emerge from neuroepithelial stem cells undergo several proliferative transitions before ceasing to divide and terminally differentiating into neurons and glia. Both maintenance of the proliferative state and terminal transition to differentiated neurons and glia are regulated, in part, by chromatin-modifying proteins that are recruited to genes by specific transcription factors. In many cases, however, chromatin-modifying proteins have only been studied in vitro, and their roles in vivo remain unknown. For example, a protein whose importance in epigenetic regulation of neural genes has been recognized is RE1 Silencing Transcription factor (REST) Corepressor 1 (RCOR1) (1, reviewed in ref. 2). RCOR1 was identified originally as a direct binding partner for the master transcriptional regulator of neural genes, REST (3-5). The REST/RCOR1 complex has been studied primarily in cultured stem/progenitor cells, neurons, and glia (6-9). Like many other adaptor proteins in transcriptional complexes, RCOR1 does not have intrinsic enzymatic activity but rather binds directly to chromatin-modifying enzymes including histone deacetylases 1 and 2 (HDAC1/2) and the histone demethylase KDM1A (LSD1) (10-12). A related protein, RCOR2, shares ∼90% homology with RCOR1 in the ELM2 and SANT functional domains (13) and is also found in complexes with KDM1A and HDAC1/2 (14). Furthermore, RCOR2 is recruited by some of t...