MeCP2 is a DNA binding protein that represses transcription of methylated genes in vitro, but the endogenous function of MeCP2 in vivo is unclear. Here, we demonstrate that in Xenopus laevis embryos MeCP2 is a partner of the SMRT corepressor complex that regulates the expression of a neuronal repressor xHairy2a in differentiating neuroectoderm. The MeCP2/SMRT complex is bound to the promoter of the silenced xHairy2a gene and is displaced upon activation by the Notch intracellular domain (NICD). A truncated form of MeCP2 (R168X) found in patients with Rett syndrome cannot interact with the SMRT complex or fully activate xHairy2a during primary neurogenesis. This disruption of MeCP2 activity results in abnormal patterning of primary neurons during neuronal differentiation. Our results support a model whereby the dynamic association of MeCP2 with methylated DNA and the SMRT complex regulates a gene involved in cell fate decisions during primary neurogenesis in Xenopus.