The brain is composed of diverse types of neurons that fulfill distinct roles in neuronal circuits, as manifested by the hippocampus, where pyramidal neurons and granule cells constitute functionally distinct domains: cornu ammonis (CA) and dentate gyrus (DG), respectively. Little is known about how these two types of neuron differentiate during hippocampal development, although a set of transcription factors that is expressed in progenitor cells is known to be required for the survival of granule cells. Here, we demonstrate in mice that Prox1, a transcription factor constitutively expressed in the granule cell lineage, postmitotically functions to specify DG granule cell identity. Postmitotic elimination of Prox1 caused immature DG neurons to lose the granule cell identity and in turn terminally differentiate into the pyramidal cell type manifesting CA3 neuronal identity. By contrast, Prox1 overexpression caused opposing effects on presumptive hippocampal pyramidal cells. These results indicate that the immature DG cell has the potential to become a granule cell or a pyramidal cell, and Prox1 defines the granule cell identity. This bi-potency is lost in mature DG cells, although Prox1 is still required for correct gene expression in DG granule cells. Thus, our data indicate that Prox1 acts as a postmitotic cell fate determinant for DG granule cells over the CA3 pyramidal cell fate and is crucial for maintenance of the granule cell identity throughout the life.