The iroquois (iro) homeobox genes participate in many developmental processes both in vertebrates and invertebrates, among them are neural plate formation and neural patterning. In this work, we study in detail Xenopus Iro (Xiro) function in primary neurogenesis. We show that misexpression of Xiro genes promotes the activation of the proneural gene Xngnr1 but suppresses neuronal differentiation. This is probably due to upregulation of at least two neuronal-fate repressors: XHairy2A and XZic2. Accordingly, primary neurons arise at the border of the Xiro expression domains. In addition, we identify XGadd45-gamma as a new gene repressed by Xiro. XGadd45-gamma encodes a cell-cycle inhibitor and is expressed in territories where cells will exit mitosis, such as those where primary neurons arise. Indeed, XGadd45-gamma misexpression causes cell cycle arrest. We conclude that, during Xenopus primary neuron formation, in Xiro expressing territories neuronal differentiation is impaired, while in adjacent cells, XGadd45-gamma may help cells stop dividing and differentiate as neurons.