Defective 3β-hydroxysterol-Δ7 −reductase (DHCR7) in the developmental disorder, Smith-Lemli-Opitz syndrome (SLOS), results in deficiency in cholesterol and accumulation of its precursor, 7-dehydrocholesterol (7-DHC). Here, we show that loss of DHCR7 causes accumulation of 7-DHC-derived oxysterol metabolites, premature neurogenesis, and perturbation of neuronal localization in developing murine or human cortical neural precursors, both in vitro and in vivo. We found that a major oxysterol, 3β,5α-dihydroxycholest-7-en-6-one (DHCEO), mediates these effects by initiating crosstalk between glucocorticoid receptor (GR) and neurotrophin receptor kinase TrkB. Either loss of DHCR7 or direct exposure to DHCEO causes hyperactivation of GR and TrkB and their downstream MEK-ERK-C/EBP signaling pathway in cortical neural precursors. Moreover, direct inhibition of GR activation with an antagonist or inhibition of DHCEO accumulation with antioxidants rescues the premature neurogenesis phenotype caused by the loss of DHCR7. These results suggest that GR could be a new therapeutic target against the neurological defects observed in SLOS.