Background Prenatal ethanol exposure during pregnancy induces a spectrum of mental and physical disorders called fetal alcohol spectrum disorder (FASD). The central nervous system is the main organ influenced by FASD, and neurological symptoms include mental retardation, learning abnormalities, hyperactivity and seizure susceptibility in childhood along with the microcephaly. In this study, we examined whether ethanol exposure adversely affects the proliferation of NPC and de-regulates the normal ratio between glutamatergic and GABAergic neuronal differentiation using primary neural progenitor culture (NPC) and in vivo FASD models. Methods Neural progenitor cells were cultured from E14 embryo brain of Sprague-Dawley rat. Pregnant mice and rats were treated with ethanol (2 or 4 g/kg/day) diluted with normal saline from E7 to E16 for in vivo FASD animal models. Expression level of proteins was investigated by western blot analysis and immunocytochemical assays. MTT was used for cell viability. Proliferative activity of NPCs was identified by BrdU incorporation, immunocytochemistry and FACS analysis. Results Reduced proliferation of NPCs by ethanol was demonstrated using BrdU incorporation, immunocytochemistry and FACS analysis. In addition, ethanol induced the imbalance between glutamatergic and GABAergic neuronal differentiation via transient increase in the expression of Pax6, Ngn2 and NeuroD with concomitant decrease in the expression of Mash1. Similar pattern of expression of those transcription factors was observed using an in vivo model of FASD as well as the increased expression of PSD-95 and decreased expression of GAD67. Conclusions These results suggest that ethanol induces hyper-differentiation of glutamatergic neuron through Pax6 pathway, which may underlie the hyper-excitability phenotype such as hyperactivity or seizure susceptibility in FASD patients.