Down syndrome (DS) is a common neurodevelopmental disorder, and cognitive defects in DS patients may arise from imbalances in excitatory and inhibitory neurotransmission. Understanding the mechanisms underlying such imbalances may provide opportunities for therapeutic intervention. Here, we show that human induced pluripotent stem cells (hiPSCs) derived from DS patients overproduce OLIG2⁺ ventral forebrain neural progenitors. As a result, DS hiPSC-derived cerebral organoids excessively produce specific subclasses of GABAergic interneurons and cause impaired recognition memory in neuronal chimeric mice. Increased OLIG2 expression in DS cells directly upregulates interneuron lineage-determining transcription factors. shRNA-mediated knockdown of OLIG2 largely reverses abnormal gene expression in early-stage DS neural progenitors, reduces interneuron production in DS organoids and chimeric mouse brains, and improves behavioral deficits in DS chimeric mice. Thus, altered OLIG2 expression may underlie neurodevelopmental abnormalities and cognitive defects in DS patients.