The basic helix-loop-helix (bHLH) transcription factor Scl displays tissue-restricted expression and is critical for the establishment of the haematopoietic system; loss of Scl results in embryonic death due to absolute anaemia. Scl is also expressed in neurons of the mouse diencephalon, mesencephalon and metencephalon; however, its requirement in those sites remains to be determined. Here we report conditional deletion of Scl in neuronal precursor cells using the Cre/LoxP system. Neuronal-Scl deleted mice died prematurely, were growth retarded and exhibited an altered motor phenotype characterized by hyperactivity and circling. Moreover, ablation of Scl in the nervous system affected brain morphology with abnormal neuronal development in brain regions known to express Scl under normal circumstances; there was an almost complete absence of Scl-null neurons in the hindbrain and partial loss of Scl-null neurons in the thalamus and midbrain from early neurogenesis onwards. Our results demonstrate a crucial role for Scl in the development of Scl-expressing neurons, including gamma-aminobutyric acid (GABA)ergic interneurons. Our study represents one of the first demonstrations of functional overlap of a single bHLH protein that regulates neural and haematopoietic cell development. This finding underlines Scl's critical function in cell fate determination of mesodermal as well as neuroectodermal tissues.