Large numbers of new neurons are born continuously in the adult subventricular zone (SVZ). The molecular niche of SVZ stem cells is poorly understood. Here, we show that the bone morphogenetic protein (BMP) antagonist Noggin is expressed by ependymal cells adjacent to the SVZ. SVZ cells were found to express BMPs as well as their cognate receptors. BMPs potently inhibited neurogenesis both in vitro and in vivo. BMP signaling cell-autonomously blocked the production of neurons by SVZ precursors by directing glial differentiation. Purified mouse Noggin protein promoted neurogenesis in vitro and inhibited glial cell differentiation. Ectopic Noggin promoted neuronal differentiation of SVZ cells grafted to the striatum. We thus propose that ependymal Noggin production creates a neurogenic environment in the adjacent SVZ by blocking endogenous BMP signaling.