Human pluripotent stem cells are a powerful tool for modeling brain development and disease. The human cortex is composed of two major neuronal populations: projection neurons and local interneurons. Cortical interneurons comprise a diverse class of cell types expressing the neurotransmitter GABA. Dysfunction of cortical interneurons has been implicated in neuropsychiatric diseases, including schizophrenia, autism, and epilepsy. Here, we demonstrate the highly efficient derivation of human cortical interneurons in an NKX2.1::GFP human embryonic stem cell reporter line. Manipulating the timing of SHH activation yields three distinct GFP+ populations with specific transcriptional profiles, neurotransmitter phenotypes, and migratory behaviors. Further differentiation in a murine cortical environment yields parvalbumin- and somatostatin-expressing neurons that exhibit synaptic inputs and electrophysiological properties of cortical interneurons. Our study defines the signals sufficient for modeling human ventral forebrain development in vitro and lays the foundation for studying cortical interneuron involvement in human disease pathology.