A complex orchestration of stem-cell specification, expansion and differentiation is required for the proper development of the nervous system. Although progress has been made on the role of individual genes in each of these processes, there are still unresolved questions about how gene function translates to the dynamic assembly of cells into tissues. Recently, stem-cell biology has emerged as a bridge between the traditional fields of cell biology and developmental genetics. In addition to their potential therapeutic role, stem cells are being exploited as experimental 'logic chips' that integrate information and exhibit self-organizing properties. Recent studies provide new insights on how morphogenic signals coordinate major stem cell decisions to regulate the size, shape and cellular diversity of the nervous system.