The telencephalon has two major subdivisions, the pallium and subpallium. The pallium, which primarily consists of glutamatergic cortical structures, expresses dorsal molecular markers, whereas the subpallium, which primarily consists of the GABAergic basal ganglia, expresses ventral molecular markers. Here, we present evidence that the progenitor and postmitotic cells flanking the pallial/subpallial boundary (PSB) in the embryonic mouse can be subdivided into multiple regions that express unique combinations of transcription factors. The domains that immediately flank the PSB are the ventral pallium (VP) and the dorsal lateral ganglionic eminence (dLGE). The early expression of the Pax6 and Gsh2 homeobox transcription factors overlaps in the region of the dLGE. Analyses of mice that lack functional alleles of either Gsh2 or Pax6 demonstrate that these genes have complementary roles in patterning the primordia flanking the PSB. In the Gsh2 mutants, the dLGE is respecified into a VP-like structure, whereas in the Pax6 mutants the VP is respecified into a dLGE-like structure. The role of Pax6 in dorsalizing the telencephalon is similar to its role in the spinal cord, supporting the hypothesis that some dorsoventral patterning mechanisms are used at all axial levels of the central nervous system.