Ebf1/Olf-1 belongs to a small multigene family encoding closely related helix-loop-helix transcription factors, which have been proposed to play a role in neuronal differentiation. Here we show that Ebf1 controls cell differentiation in the murine embryonic striatum, where it is the only gene of the family to be expressed. Ebf1 targeted disruption affects postmitotic cells that leave the subventricular zone (SVZ) en route to the mantle: they appear to be unable to downregulate genes normally restricted to the SVZ or to activate some mantle-specific genes. These downstream genes encode a variety of regulatory proteins including transcription factors and proteins involved in retinoid signalling as well as adhesion/guidance molecules. These early defects in the SVZ/mantle transition are followed by an increase in cell death, a dramatic reduction in size of the postnatal striatum and defects in navigation and fasciculation of thalamocortical fibres travelling through the striatum. Our data therefore show that Ebf1 plays an essential role in the acquisition of mantle cell molecular identity in the developing striatum and provide information on the genetic hierarchies that govern neuronal differentiation in the ventral telencephalon.