Obtaining the diversity of interneuron subtypes in their appropriate numbers requires the orchestrated integration of progenitor proliferation with the regulation of differentiation. Here we demonstrate through loss-of-function studies in mice that the Cut homeodomain transcription factor Cux2 (Cutl2) plays an important role in regulating the formation of dorsal spinal cord interneurons. Furthermore, we show that Notch regulates Cux2 expression. Although Notch signaling can be inhibitory to the expression of proneural genes, it is also required for interneuron formation during spinal cord development. Our findings suggest that Cux2 might mediate some of the effects of Notch signaling on interneuron formation. Together with the requirement for Cux2 in cell cycle progression, our work highlights the mechanistic complexity in balancing neural progenitor maintenance and differentiation during spinal cord neurogenesis.