Astrocytes constitute a very abundant cell type in the mammalian central nervous system and play critical roles in brain function. During development, astrocytes are generated from neural progenitor cells only after these cells have generated neurons. This so called gliogenic switch is tightly regulated by intrinsic factors that inhibit the generation of astrocytes during the neurogenic period. Once neural progenitors acquire gliogenic competence, they differentiate into astrocytes in response to specific extracellular signals. Some of these signals are delivered by neurotrophic cytokines via activation of the gp130-JAK-signal transducer and activator of transcription system, whereas others depend on the activity of pituitary adenylate cyclase-activating polypeptide (PACAP) on specific PAC1 receptors that stimulate the production of cAMP. This results in the activation of the small GTPases Rap1 and Ras, and in the cAMP-dependent entry of extracellular calcium into the cell. Calcium, in turn, stimulates the transcription factor downstream regulatory element antagonist modulator (DREAM), which is bound to specific sites of the promoter of the glial fibrillary acidic protein gene, stimulating its expression during astrocyte differentiation. Lack of DREAM in vivo results in alterations in the number of neurons and astrocytes generated during development. Thus, the PACAP-cAMP-Ca(2+)-DREAM signaling cascade constitutes an important pathway to activate glial-specific gene expression during astrocyte differentiation.