Neuronal subtype specification in the vertebrate neural tube is one of the best-studied examples of embryonic pattern formation. Distinct neuronal subtypes are generated in a precise spatial order from progenitor cells according to their location along the anterior-posterior and dorsal-ventral axes. Underpinning this organization is a complex network of multiple extrinsic and intrinsic factors. This review focuses on the molecular mechanisms and general strategies at play in ventral regions of the forming spinal cord, where sonic hedgehog-based morphogen signaling is a key determinant. We discuss recent advances in our understanding of these events and highlight unresolved questions.