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.