Proteoglycans are cell surface and extracellular matrix molecules to which long, unbranched glycosaminoglycan side chains are attached. Heparan sulphate, a type of glycosaminoglycan chain, has been proposed as a co-factor necessary for signalling by a range of growth factors. Here we provide evidence that loss of 2-O-sulphation in heparan sulphate leads to a significant reduction in cell proliferation in the developing cerebral cortex. The gene encoding heparan sulphate 2-sulphotransferase (Hs2st) is expressed in embryonic cortex and histological analysis of mice homozygous for a null mutation in Hs2st indicated a reduction in the thickness of the embryonic cerebral cortex. Using 5'-bromodeoxyuridine (BrdU) incorporation assays we found a reduction of approximately 40% in labelling indices of cortical precursor cells at E12. Comparison of the fates of cortical cells born on E13 and E15 in Hs2st(-/-) mutant and wildtype littermate embryos revealed no differences in the pattern of cell migration. Our findings suggest a critical role for 2-O-sulphation of heparan sulphate proteoglycan (HSPG) in regulating cell proliferation during development of the cerebral cortex, perhaps through the modulation of cellular responses to growth factor signalling.