Microglia play important roles in the damaged or degenerating adult nervous system. However, the role of microglia in embryonic brain development is still largely uncharacterized. Here we show that microglia are present in regions of the developing brain that contain neural precursors from E11 onward. To determine whether these microglia are important for neural precursor maintenance or self‐renewal, we cultured embryonic neural precursors from the cortex of PU.1^−/− mice, which we show lack resident microglia during embryogenesis. Cell survival and neurogenesis were similar in cultures from PU.1^−/− vs. PU.1^+/+ mice, but precursor proliferation and astrogenesis were both reduced. Cortical precursors depleted of microglia also displayed decreased precursor proliferation and astrogenesis, and these deficits could be rescued when microglia were added back to the cultures. Moreover, when the number of microglia present in cortical precursor cultures was increased above normal levels, astrogenesis but not neurogenesis was increased. Together these results demonstrate that microglia present within the embryonic neural precursor niche can regulate neural precursor development and suggest that alterations in microglial number as a consequence of genetic or pathological events could perturb neural development by directly affecting embryonic neural precursors. © 2011 Wiley‐Liss, Inc.