In the developing ventral spinal cord, motor neurons (MNs) and oligodendrocyte precursor cells (OPCs) are sequentially generated from a common pool of neural progenitors included in the so-called pMN domain characterized by Olig2 expression. Here, we establish that the secreted Sulfatase 1 (Sulf1) is a major component of the mechanism that causes these progenitors to stop producing MNs and change their fate to generate OPCs. We show that specification of OPCs is severely affected in sulf1-deficient mouse embryos. This defect does not rely on abnormal patterning of the spinal cord or failure in maintenance of pMN progenitors at the onset of OPC specification. Instead, the efficiency of OPC induction is reduced, only few Olig2 progenitors are recruited to generate OPCs, meanwhile they continue to produce MNs beyond the normal timing of the neuroglial switch. Using the chicken embryo, we show that Sulf1 activity is required precisely at the stage of the MN-to-OPC fate switch. Finally, we bring arguments supporting the view that Sulf1 controls the level of Sonic Hedgehog (Shh) signaling activity, behaving as an enhancer rather than an obligatory component in the Shh pathway. Our study provides additional insights into the temporal control of Olig2 progenitor cell fate change by the identification of Sulf1 as an extracellular timing signal in the ventral spinal cord.