Neural stem cells (NSCs) have the capacity to differentiate into neurons, astrocytes, and oligodendrocytes, and therefore represent a promising donor tissue source for treating neurodegenerative diseases and repairing injuries of the nervous system. However, it remains unclear how canonical microRNAs (miRNAs), the subset of miRNAs requiring the Drosha-Dgcr8 microprocessor and the type III RNase Dicer for biogenesis, regulate NSCs. In this study, we established and characterized Dgcr8-/- NSCs from conditionally Dgcr8-disrupted mouse embryonic brain. RNA-seq analysis demonstrated that disruption of Dgcr8 in NSCs causes a complete loss of canonical miRNAs and an accumulation of pri-miRNAs. Dgcr8-/- NSCs can be stably propagated in vitro, but progress through the cell cycle at reduced rates. When induced for differentiation, Dgcr8-/- NSCs failed to differentiate into neurons, astrocytes, or oligodendrocytes under permissive conditions. Compared to Dgcr8+/- NSCs, Dgcr8-/- NSCs exhibit significantly increased DNA damage. Comparative RNA-seq analysis and gene set enrichment analysis (GSEA) revealed that Dgcr8-/- NSCs significantly downregulate genes associated with neuronal differentiation, cell cycle progression, DNA replication, protein translation, and DNA damage repair. Furthermore, we discovered that Dgcr8-/- NSCs significantly downregulate genes responsible for cholesterol biosynthesis and demonstrated that Dgcr8-/- NSCs contain lower levels of cholesterol. Together, our data demonstrate that canonical miRNAs play essential roles in enabling lineage specification, protecting DNA against damage, and promoting cholesterol biosynthesis in NSCs.