To understand life-long neurogenesis in the dentate gyrus (DG), characterizing dentate neural stem cells and the signals controlling their development are crucial. In the present study, we show that bone morphogenic protein (Bmp) signaling is a critical regulator of embryonic dentate development, required for initiating neurogenesis in embryonic DG progenitors and required for the establishment of dentate neural stem cells postnatally. We tested the hypothesis that Bmp signaling regulates dentate development in part by controlling the expression of Lef1, a Wnt responsive transcription factor expressed in dentate stem cells and absolutely required for dentate granule cell production. Bmp activation through the Acvr1 receptor induced Lef1 expression and neurogenesis in the embryonic DG. Ectopic expression of Bmp7 in the embryonic midline increased DG neurogenesis and inhibition of local Bmp signaling decreased embryonic DG neurogenesis. Mice with selective loss of Bmp expression due to defective meningeal development or with selective conditional deletion of meningeal Bmp7 also have dentate developmental defects. Conditional deletion of Activin receptor type I (Acvr1) or Smad4 (a downstream target nuclear effector of Bmp signaling) in DG neural stem cells resulted in defects in the postnatal subgranular zone and reduced neurogenesis. These results suggest that Acvr1-mediated meningeal Bmp signaling regulates Lef1 expression in the dentate, regulating embryonic DG neurogenesis, DG neural stem cell niche formation, and maintenance.