A major question in neural development is whether each part of the telencephalon has an equal potential to generate each cell type. In this study, we address this question specifically in regard to the generation of oligodendrocytes. We cultured precursor cells from two different regions of the rat embryonic telencephalon--the ganglionic eminence that the anlage of the cerebral cortex--from different stages of development, and labeled the cells with a retroviral vector to follow their fate. We discovered that multipotential precursor cells from E13 ganglionic eminence have several orders of magnitude higher capacity to generate oligodendrocyte than the equivalent cells from E13 cerebral cortex. This failure of cortical precursor cells to generate oligodendrocytes at early development stages (E12-E13) could not be reversed by growth factors, permissive growth media, or a permissive striatal cell environment. A combination of striatal contact and plus specific growth factors, however, did induce the production of oligodendrocytes. We conclude that telencephalic precursor cells do not have the potential to generate oligodendrocytes, but that this potential is significantly greater in striatal than cortical multipotential precursor cells.