High‐lipid diet composed of saturated fatty acids (SFAs) has significant detrimental effects on brain homeostasis, and deleterious effects of SFAs on various cells have been well documented. However, the effects of SFAs on neural stem Cells (NSCs) function have not been fully explored. The aim of this study was to determine whether palmitic acid (PA) affected the proliferation and differentiation of murine‐derived NSCs. The results showed that PA dose dependently suppressed viability of NSCs and was cytotoxic at high concentrations. The toxic levels of PA inhibited the proliferation of NSCs as shown by reduced bromodeoxyuridine labeling of NSCs, which is correlated with reactive oxygen species generation. Pretreatment of the cells with the antioxidant N‐acetyl‐L‐cysteine inhibitor significantly attenuated the effects of PA on the proliferation of NSCs. Furthermore, nontoxic levels of PA promoted astrocytogenesis in the differentiated NSCs, associated with Stat3 activation and altered expression of serial of basic helix–loop–helix transcription factor genes. Altogether, our data have demonstrated that PA has a significant impact on proliferation and differentiation of NSCs in vitro and may be useful for elucidating the role of SFAs in regulating NSCs fate in physiological and pathological settings. © 2014 Wiley Periodicals, Inc.