Objective To explore the effect of sonic hedgehog on the proliferation and differentiation of neural stem cells (NSCs). Methods NSCs isolated from the cortex and hippocampus of rat embryos. were divided into SHH group, RA group and PBS group, which were treated with sonic hedgehog (SHH), retinoic acid (RA) or PBS condition medium respectively. Effect of these treatments on the proliferation and differentiation of the NSCs were detected by immunocytochemistry. Results NSCs could grow quickly and form neurospheres in culture. The cells in the neurospheres were positive for nestin which is one of the NSC markers. After the medium was supplemented with BrdU for 3h, the percentage of BrdU positive cells in the SHH group was significantly higher than that of the RA group and PBS group. However, there was no obvious difference between RA group and PBS group. After the NSCs were cultured in differentiating condition medium for 7 days, the percentages of βⅢ-ubulin and Rip positive cells in the SHH treated group were significantly higher than that in the RA and PBS treated groups. Conclusions SHH could promote NSC proliferation and differentiation into neurons and oligodendrocytes.