During brain morphogenesis, the mechanisms through which the cell cycle machinery integrates with differentiation signals remain elusive. Here we show that the Rb/E2F pathway regulates key aspects of differentiation and migration through direct control of the Dlx1 and Dlx2 homeodomain proteins, required for interneuron specification. Rb deficiency results in a dramatic reduction of Dlx1 and Dlx2 gene expression manifested by loss of interneuron subtypes and severe migration defects in the mouse brain. The Rb/E2F pathway modulates Dlx1/Dlx2 regulation through direct interaction with a Dlx forebrain-specific enhancer, I12b, and the Dlx1/Dlx2 proximal promoter regions, through repressor E2F sites both in vitro and in vivo. In the absence of Rb, we demonstrate that repressor E2Fs inhibit Dlx transcription at the Dlx1/Dlx2 promoters and Dlx1/2-I12b enhancer to suppress differentiation. Our findings support a model whereby the cell cycle machinery not only controls cell division but also modulates neuronal differentiation and migration through direct regulation of the Dlx1/Dlx2 bigene cluster during embryonic development.