Capicua (CIC), a member of the high mobility group (HMG)-box superfamily of transcriptional repressors, is frequently mutated in human oligodendrogliomas. But its function in brain development and tumorigenesis remains poorly understood. Here, we report that brain-specific deletion of Cic compromises developmental transition of neuroblast to immature neurons in mouse hippocampus and compromises normal neuronal differentiation. Combined gene expression and ChIP-seq analyses identified VGF as an important CIC-repressed transcriptional surrogate involved in neuronal lineage regulation. Aberrant VGF expression promotes neural progenitor cell proliferation by suppressing their differentiation. Mechanistically, we demonstrated that CIC represses VGF expression by tethering SIN3-HDAC to form a transcriptional corepressor complex. Mass spectrometry analysis of CIC-interacting proteins further identified BRG1 containing mSWI/SNF complex whose function is necessary for transcriptional repression by CIC. Together, this study uncovers a novel regulatory pathway of CIC-dependent neuronal differentiation and may implicate these molecular mechanisms in CIC-dependent brain tumorigenesis.