The link between Zika virus (ZIKV) infection and microcephaly has raised urgent global alarm. The historical African ZIKV MR766 was recently shown to infect cultured human neural precursor cells (NPCs), but unlike the contemporary ZIKV strains, it is not believed to cause microcephaly. Here we investigated whether the Asian ZIKV strain SZ01 could infect NPCs in vivo and affect brain development. We found that SZ01 replicates efficiently in embryonic mouse brain by directly targeting different neuronal linages. ZIKV infection leads to cell-cycle arrest, apoptosis, and inhibition of NPC differentiation, resulting in cortical thinning and microcephaly. Global gene expression analysis of infected brains reveals upregulation of candidate flavirus entry receptors and dysregulation of genes associated with immune response, apoptosis, and microcephaly. Our model provides evidence for a direct link between Zika virus infection and microcephaly, with potential for further exploration of the underlying mechanisms and management of ZIKV-related pathological effects during brain development.