Rett syndrome (RTT) is a severe neurological disorder, with impaired brain development caused by mutations in MECP2; however, the underlying mechanism remains elusive. We know from previous work that MeCP2 facilitates the processing of a specific microRNA, miR-199a, by associating with the Drosha complex to regulate neuronal functions. Here, we show that the MeCP2/miR-199a axis regulates neural stem/precursor cell (NS/PC) differentiation. A shift occurs from neuronal to astrocytic differentiation of MeCP2- and miR-199a-deficient NS/PCs due to the upregulation of a miR-199a target, Smad1, a downstream transcription factor of bone morphogenetic protein (BMP) signaling. Moreover, miR-199a expression and treatment with BMP inhibitors rectify the differentiation of RTT patient-derived NS/PCs and development of brain organoids, respectively, suggesting that facilitation of BMP signaling accounts for the impaired RTT brain development. Our study illuminates the molecular pathology of RTT and reveals the MeCP2/miR-199a/Smad1 axis as a potential therapeutic target for RTT.