Background: Valproic acid (VPA), a commonly used mood stabilizer that promotes neuronal differentiation, regulates multiple signaling pathways involving extracellular signal-regulated kinase (ERK) and glycogen synthase kinase3β (GSK3β). However, the mechanism by which VPA promotes differentiation is not understood. Results: We report here that 1 mM VPA simultaneously induces differentiation and reduces proliferation of basic fibroblast growth factor (bFGF)-treated embryonic day 14 (E14) rat cerebral cortex neural progenitor cells (NPCs). The effects of VPA on the regulation of differentiation and inhibition of proliferation occur via the ERK-p21^Cip/WAF1 pathway. These effects, however, are not mediated by the pathway involving the epidermal growth factor receptor (EGFR) but via the pathway which stabilizes Ras through β-catenin signaling. Stimulation of differentiation and inhibition of proliferation in NPCs by VPA occur independently and the β-catenin-Ras-ERK-p21^Cip/WAF1 pathway is involved in both processes. The independent regulation of differentiation and proliferation in NPCs by VPA was also demonstrated in vivo in the cerebral cortex of developing rat embryos. Conclusion: We propose that this mechanism of VPA action may contribute to an explanation of its anti-tumor and neuroprotective effects, as well as elucidate its role in the independent regulation of differentiation and inhibition of proliferation in the cerebral cortex of developing rat embryos.