Little is known about the respective contributions of cell proliferation and cell death to the control of vertebrate forebrain growth. The homeodomain protein barhl2 is expressed in the diencephalons of Xenopus, zebrafish, and mouse embryos, and we previously showed that Barhl2 overexpression in Xenopus neuroepithelial cells induces Caspase3-dependent apoptosis. Here, barhl2 is shown to act as a brake on diencephalic proliferation through an unconventional function of Caspase3. Depletion of Barhl2 or Caspase3 causes an increase in diencephalic cell number, a disruption of the neuroepithelium architecture, and an increase in Wnt activity. Surprisingly, these changes are not caused by decreased apoptosis but instead, are because of an increase in the amount and activation of β-catenin, which stimulates excessive neuroepithelial cell proliferation and induces defects in β-catenin intracellular localization and an up-regulation of axin2 and cyclinD1, two downstream targets of β-catenin/T-cell factor/lymphoïd enhancer factor signaling. Using two different sets of complementation experiments, we showed that, in the developing diencephalon, Caspase3 acts downstream of Barhl2 in limiting neuroepithelial cell proliferation by inhibiting β-catenin activation. Our data argue that Bar homeodomain proteins share a conserved function as cell type-specific regulators of Caspase3 activities.