For a progenitor cell to become a neuron, three activities must occur: neuronal differentiation program must be activated, elements repressing neuronal differentiation must be deactivated and competing differentiation programs must be silenced. It is known that NeuroD2 and related bHLH transcription factors induce neuronal differentiation, REST represses neuronal differentiation, and Zfhx1a prevents myogenic gene expression. We demonstrate that NeuroD2 suppresses REST during differentiation in culture. In the hippocampus of NeuroD2 knockout mice, higher level of REST is detected. Functional significance of NeuroD2-REST interplay is uncovered by showing that forced expression of REST interferes with neuronal differentiation in culture. NeuroD2 inhibits REST indirectly by involving the inhibitor of myogenic genes, Zfhx1a, which binds response elements in REST 5'-UTR. Our study supports a model wherein NeuroD2 induces transcription of neuronal genes and Zfhx1a, which in turn de-represses neuronal differentiation by down-regulating REST, and suppresses competing myogenic fate.