Understanding the normal development of individual neural subtypes provides an essential framework for the design of rational approaches to embryonic stem cell differentiation for in vitro studies and cell replacement therapies. Of particular interest and a particular challenge are the cells that build-up the telencephalon. Recent research has unraveled key developmental mechanisms contributing to the generation of specific telencephalic cells. We focus on morphogens and transcription factors known to regulate distinct developmental processes. These include early anterior/posterior patterning, dorsal/ventral patterning, and generation of progenitor domains and neuronal specification into major classes of telencephalic cells: glutamatergic projection neurons, different subtypes of γ-aminobutyric acid-ergic interneurons and projection neurons, as well as cholinergic interneurons and projection neurons. Based on a comparison with in vivo telencephalic neurogenesis, we propose that the specific combinations of transcription factors expressed during development can serve as milestones for the in vitro differentiation of embryonic stem cells toward specific telencephalic neurons.