The central nervous system (CNS) develops from the neural tube, a hollow structure filled with embryonic cerebrospinal fluid (eCSF) and surrounded by neuroepithelial cells. Several lines of evidence suggest that the eCSF contains diffusible factors regulating the survival, proliferation, and differentiation of the neuroepithelium, although these factors are only beginning to be uncovered. One possible candidate as eCSF morphogenetic molecule is SCO-spondin, a large glycoprotein whose secretion by the diencephalic roof plate starts at early developmental stages. In vitro, SCO-spondin promotes neuronal survival and differentiation, but its in vivo function still remains to be elucidated. Here we performed in vivo loss of function experiments for SCO-spondin during early brain development by injecting and electroporating a specific shRNA expression vector into the neural tube of chick embryos. We show that SCO-spondin knock down induces an increase in neuroepithelial cells proliferation concomitantly with a decrease in cellular differentiation toward neuronal lineages, leading to hyperplasia in both the diencephalon and the mesencephalon. In addition, SCO-spondin is required for the correct morphogenesis of the posterior commissure and pineal gland. Because SCO-spondin is secreted by the diencephalon, we sought to corroborate the long-range function of this protein in vitro by performing gain and loss of function experiments on mesencephalic explants. We find that culture medium enriched in SCO-spondin causes an increased neurodifferentiation of explanted mesencephalic region. Conversely, inhibitory antibodies against SCO-spondin cause a reduction in neurodifferentiation and an increase of mitosis when such explants are cultured in eCSF. Our results suggest that SCO-spondin is a crucial eCSF diffusible factor regulating the balance between proliferation and differentiation of the brain neuroepithelial cells.