Secreted proteoglycan molecule Tsukushi (TSK) regulates various developmental processes, such as early body patterning and neural plate formation by interacting with major signaling pathways like Wnt, BMP, Notch etc. In central nervous system, TSK inhibits Wnt signaling to control chick retinal development. It also plays important roles for axon guidance and anterior commissure formation in mouse brain. In the present study, we investigated the role of TSK for the development and proper functioning of mouse hippocampus. We found that TSK expression is prominent at hippocampal regions of early postnatal mouse until postnatal day 15 and gradually declines at later stages. Hippocampal dimensions are affected in TSK knockout mice (TSK‐KO) as shown by reduced size of hippocampus and dentate gyrus (DG). Interestingly, neural stem cell (NSC) density at the neural niche of DG was higher in TSK‐KO compared with wild‐type. The ratio of proliferating NSCs as well as the rate of overall cell proliferation was also higher in TSK‐KO hippocampus. Our in vitro study also suggests an increased number of neural stem/progenitor cells residing in TSK‐KO hippocampus. Finally, we found that the terminal differentiation of NSCs in TSK‐KO was disturbed as the differentiation to neuronal cell lineage was increased while the percentages of astrocytes and oligodendrocytes were decreased. Overall, our study establishes the involvement of TSK in hippocampal development, NSC maintenance and terminal differentiation at perinatal stages.