Despite considerable progress, the mechanisms that control neural progenitor differentiation and behavior, as well as their functional integration into adult neural circuitry, are far from being understood. Given the complexity of the mammalian brain, non-mammalian models provide an excellent model to study neurogenesis, including both the cellular composition of the neurogenic microenvironment, and the factors required for precursor growth and maintenance. In particular, we chose to address the question of the control of progenitor proliferation by Sonic hedgehog (Shh) using the zebrafish dorsal mesencephalon, known as the optic tectum (OT), as a model system. Here we show that either inhibiting pharmacologically or eliminating hedgehog (Hh) signaling by using mutants that lack essential components of the Hh pathway reduces neural progenitor cell proliferation affecting neurogenesis in the OT. On the contrary, pharmacological gain-of-function experiments result in significant increase in proliferation. Importantly, Shh-dependent function controls neural progenitor cell behavior as sox2-positive cell populations were lost in the OT in the absence of Hh signaling, as evidenced in slow-muscle-omitted (smu) mutants and with timed cyclopamine inhibition. Expressions of essential components of the Hh pathway reveal for the first time a late dorsal expression in the embryonic OT. Our observations argue strongly for a role of Shh in neural progenitor biology in the OT and provide comparative data to our current understanding of progenitor/stem cell mechanisms that place Shh as a key niche factor in the dorsal brain.