Oligodendrocytes are the cells responsible for the formation of myelin in the central nervous system. Recent studies demonstrated that cells of the oligodendrocyte lineage initially arise in distinct regions of the ventricular zone during early development. These cells or their progeny migrate to developing white matter tracts where they undergo the majority of their proliferation and subsequently differentiate into myelinating cells. Oligodendrocyte-precursor cell proliferation is regulated by a number of distinct growth factors that act at distinct stages in the lineage and the final number of oligodendrocytes in any region of the CNS is regulated by local influences. A density-dependent feedback inhibition of proliferation reduces the responsiveness of the cells to their growth factors and the final matching of oligodendrocyte and axon number is accomplished through the local regulation of cell death. In this review, we discuss the major factors that regulate three distinct stages in the development of the oligodendrocyte lineage: The initial induction of oligodendrocyte progenitors, the regulation of expansion and dispersion of the committed precursor cell population, and the final regulation of oligodendrocyte precursor number through the local inhibition of oligodendrocyte precursor proliferation and cell death.