The specification of diverse classes of neurons is critical to the development of the cerebellar cortex. Here, we describe the purification of early embryonic precursors of cerebellar granule neurons from the rhombic lip, the dorsal aspect of the midbrain/hindbrain region. Isolation of rhombic lip cells reveals a homogenous population of precursor cells that express general neuronal markers and the granule cell marker RU49, but fail to extend neurites or express differentiation markers. Differentiation is induced by coculture with external germinal layer (EGL) cells, or their membranes, suggesting that a local inducing factor acts after formation of the EGL. Thus, proliferating precursors within the rhombic lip are specified to be granule cells very early, with the availability of an inducing factor increasing over the course of development.