Neural stem cells (NSCs) in the embryonic neocortex sequentially generate different subtypes of glutamatergic projection neurons. Following that, NSCs undergo a major switch in their progenitor properties and produce g-aminobutyric acid (GABAergic) interneurons for the olfactory bulb (OB), cortical oligodendrocytes, and astrocytes. Herein, I provide evidence for the molecular mechanism that underlies this switch in the neocortical NSCs. At around E16.5, mouse neocortical NSCs start to generate Gsx2-expressing (Gsx2+) intermediate progenitor cells (IPCs). In vivo lineage tracing study revealed that Gsx2+ IPC population gives rise not only to OB interneurons (OB-INs) but also to cortical oligodendrocytes and astrocytes, suggesting that they are a multipotent population. I found that Sonic Hedgehog signaling is both necessary and sufficient for the generation of Gsx2+ IPCs by reducing Gli3R protein levels. Using single-cell RNA sequencing, I identified the transcriptional profile of Gsx2+ IPCs and the process of the lineage switch of cortical NSCs. The Gli3 ChIP-seq revealed 4 binding sites in Olig2/Olig1 locus and two of them are also bound by Pax6 shown by the Pax6 ChIP-seq data. Chromatin at these 4 binding sites show increased accessibility in the ATAC-seq assay. CUT&RUN analysis using histone marks indicates that they are potential enhancers. I generated the enhancer knock-out mice and found that these binding sites are essential for Olig2/Olig1 expression in NSCs and IPCs. The circularized chromosome conformation capture (4C) experiments revealed physical interactions between these binding sites and Olig2/Olig1 promoters. More importantly, I found that OB lineage cells and Olig2 positive cells are dramatically increased in the hGFAP-Cre; Gli3F/F; Pax6F/F (Gli3 Pax6 dcko) which indicates that Gli3 and Pax6 are involved in a common regulatory mechanism that regulate NSCs lineage switch.