The transcription factor Sox2 is necessary to maintain pluripotency of embryonic stem cells, and to regulate neural development. Neurogenesis in the vertebrate olfactory epithelium persists from embryonic stages through adulthood. The role Sox2 plays for the development of the olfactory epithelium and neurogenesis within has, however, not been determined. Here, by analysing Sox2 conditional knockout mouse embryos and chick embryos deprived of Sox2 in the olfactory epithelium using CRISPR-Cas9, we show that Sox2 activity is crucial for the induction of the neural progenitor gene Hes5 and for subsequent differentiation of the neuronal lineage. Our results also suggest that Sox2 activity promotes the neurogenic domain in the nasal epithelium by restricting Bmp4 expression. The Sox2-deficient olfactory epithelium displays diminished cell cycle progression and proliferation, a dramatic increase in apoptosis and finally olfactory pit atrophy. Moreover, chromatin immunoprecipitation data show that Sox2 directly binds to the Hes5 promoter in both the PNS and CNS. Taken together, our results indicate that Sox2 is essential to establish, maintain and expand the neuronal progenitor pool by suppressing Bmp4 and upregulating Hes5 expression.