Background: Nolz1 is a zinc finger transcription factor whose expression is enriched in the lateral ganglionic eminence (LGE), although its function is still unknown. Results: Here we analyze the role of Nolz1 during LGE development. We show that Nolz1 expression is high in proliferating neural progenitor cells (NPCs) of the LGE subventricular zone. In addition, low levels of Nolz1 are detected in the mantle zone, as well as in the adult striatum. Similarly, Nolz1 is highly expressed in proliferating LGE-derived NPC cultures, but its levels rapidly decrease upon cell differentiation, pointing to a role of Nolz1 in the control of NPC proliferation and/or differentiation. In agreement with this hypothesis, we find that Nolz1 over-expression promotes cell cycle exit of NPCs in neurosphere cultures and negatively regulates proliferation in telencephalic organotypic cultures. Within LGE primary cultures, Nolz1 over-expression promotes the acquisition of a neuronal phenotype, since it increases the number of β-III tubulin (Tuj1)- and microtubule-associated protein (MAP)2-positive neurons, and inhibits astrocyte generation and/or differentiation. Retinoic acid (RA) is one of the most important morphogens involved in striatal neurogenesis, and regulates Nolz1 expression in different systems. Here we show that Nolz1 also responds to this morphogen in E12.5 LGE-derived cell cultures. However, Nolz1 expression is not regulated by RA in E14.5 LGE-derived cell cultures, nor is it affected during LGE development in mouse models that present decreased RA levels. Interestingly, we find that Gsx2, which is necessary for normal RA signaling during LGE development, is also required for Nolz1 expression, which is lost in Gsx2 knockout mice. These findings suggest that Nolz1 might act downstream of Gsx2 to regulate RA-induced neurogenesis. Keeping with this hypothesis, we show that Nolz1 induces the selective expression of the RA receptor (RAR)β without altering RARα or RARγ. In addition, Nozl1 over-expression increases RA signaling since it stimulates the RA response element. This RA signaling is essential for Nolz1-induced neurogenesis, which is impaired in a RA-free environment or in the presence of a RAR inverse agonist. It has been proposed that Drosophila Gsx2 and Nolz1 homologues could cooperate with the transcriptional co-repressors Groucho-TLE to regulate cell proliferation. In agreement with this view, we show that Nolz1 could act in collaboration with TLE-4, as they are expressed at the same time in NPC cultures and during mouse development. Conclusions: Nolz1 promotes RA signaling in the LGE, contributing to the striatal neurogenesis during development.