Distinct classes of neurons are generated at defined positions in the ventral neural tube in response to a gradient of Sonic Hedgehog (Shh) activity. A set of homeodomain transcription factors expressed by neural progenitors act as intermediaries in Shh-dependent neural patterning. These homeodomain factors fall into two classes: class I proteins are repressed by Shh and class II proteins require Shh signaling for their expression. The profile of class I and class II protein expression defines five progenitor domains, each of which generates a distinct class of postmitotic neurons. Cross-repressive interactions between class I and class II proteins appear to refine and maintain these progenitor domains. The combinatorial expression of three of these proteins—Nkx6.1, Nkx2.2, and Irx3—specifies the identity of three classes of neurons generated in the ventral third of the neural tube.