In the embryonic chick ventral spinal cord, the initial emergence of oligodendrocytes is a relatively late event that depends on prolonged Sonic hedgehog (Shh) signaling. In this report, we show that specification of oligodendrocyte precursors (OLPs) from ventral Nkx2.2-expressing neural progenitors occurs precisely when these progenitors stop generating neurons, indicating that the mechanism of the neuronal/oligodendroglial switch is a common feature of ventral OLP specification. We further show that an experimental early increase in the concentration of Shh is sufficient to induce premature specification of OLPs at the expense of neuronal genesis indicating that the relative doses of Shh received by ventral progenitors determine whether they become neurons or glia. Accordingly, we observe that the Shh protein accumulates at the apical surface of Nkx2.2-expressing cells just before OLP specification, providing direct evidence that these cells are subjected to a higher concentration of the morphogen when they switch to an oligodendroglial fate. Finally, we show that this abrupt change in Shh distribution is most likely attributable to the timely activity of Sulfatase 1 (Sulf1), a secreted enzym that modulates the sulfation state of heparan sulfate proteoglycans. Sulf1 is expressed in the ventral neuroepithelium just before OLP specification, and we show that its experimental overexpression leads to apical concentration of Shh on neuroepithelial cells, a decisive event for the switch of ventral neural progenitors toward an oligodendroglial fate.