The function of reactive oxygen species (ROS) as second messengers in cell differentiation has been demonstrated only for a limited number of cell types. Here, we used a well-established protocol for BMP2-induced neuronal differentiation of neural crest stem cells (NCSCs) to examine the function of BMP2-induced ROS during the process. We first show that BMP2 indeed induces ROS generation in NCSCs and that blocking ROS generation by pretreatment of cells with diphenyleneiodonium (DPI) as NADPH oxidase (Nox) inhibitor inhibits neuronal differentiation. Among the ROS-generating Nox isozymes, only Nox4 was expressed at a detectable level in NCSCs. Nox4 appears to be critical for survival of NCSCs at least in vitro as down-regulation by RNA interference led to apoptotic response from NCSCs. Interestingly, development of neural crest-derived peripheral neural structures in Nox4-/- mouse appears to be grossly normal, although Nox4-/- embryos were born at a sub-Mendelian ratio and showed delayed over-all development. Specifically, cranial and dorsal root ganglia, derived from NCSCs, were clearly present in Nox4-/- embryo at embryonic days (E) 9.5 and 10.5. These results suggest that Nox4-mediated ROS generation likely plays important role in fate determination and differentiation of NCSCs, but other Nox isozymes play redundant function during embryogenesis.