GABAergic neurons are an essential cellular component of neural circuits. Their abundance and diversity have enlarged significantly in the human brain, contributing to the expanded cognitive capacity of humans. However, the developmental mechanism of the extended production of GABAergic neurons in the human brain remains elusive. Here, we use single-cell transcriptomics, bioinformatics, and histological analyses to uncover microglial regulation of the sustained proliferation of GABAergic progenitors and neuroblasts in the human medial ganglionic eminence (hMGE). We show that insulin-like growth factor 1 (IGF1) and its receptor IGR1R as the top ligand-receptor pair underlying microglia-progenitor communication in the prenatal human brain. Using our newly developed neuroimmune hMGE organoids, which mimics hMGE cytoarchitecture and developmental trajectory, we demonstrate that microglia-derived IGF1 promotes progenitor proliferation and the production of GABAergic neurons. Conversely, IGF1-neutralizing antibodies and IGF1 knockout human embryonic stem cells (hESC)-induced microglia (iMG) completely abolished iMG-mediated progenitor proliferation. Together, these findings reveal a previously unappreciated role of microglia-derived IGF1 in promoting proliferation of neural progenitors and the development of GABAergic neurons.