Midbrain dopamine (DA) neurons are essential for maintaining multiple brain functions. These neurons have also been implicated in relation with diverse neurological disorders. However, how these neurons are developed from neuronal stem cells (NSCs) remains largely unknown. In this study, we provide both in vivo and in vitro evidence that the thyroid hormone, an important physiological factor for brain development, promotes DA neuron differentiation from embryonic ventral midbrain (VM) NSCs. We find that thyroid hormone deficiency during development reduces the midbrain DA neuron number, downregulates the expression of tyrosine hydroxylase (TH) and the dopamine transporter (DAT), and impairs the DA neuron-dependent motor behavior. In addition, thyroid hormone treatment during VM NSC differentiation in vitro increases the production of DA neurons and upregulates the expression of TH and DAT. We also found that the thyroid hormone enhances the expression of Otx2, an important determinant of DA neurogenesis, during DA neuron differentiation. Our in vitro gene silencing experiments indicate that Otx2 is required for thyroid hormone-dependent DA neuron differentiation from embryonic VM NSCs. Finally, we revealed both in vivo and in vitro that the thyroid hormone receptor alpha 1 is expressed in embryonic VM NSCs. Furthermore, it participates in the effects of thyroid hormone-induced Otx2 upregulation and DA neuron differentiation. These data demonstrate the role and molecular mechanisms of how the thyroid hormone regulates DA neuron differentiation from embryonic VM NSCs, particularly providing new mechanisms and a potential strategy for generating dopamine neurons from NSCs.