The telencephalon is the most highly evolved region of the vertebrate central nervous system (CNS). The major structures of the telencephalon - the cortex and basal ganglia – derive from the dorsally positioned pallium and the ventrally positioned subpallium, respectively. Differences in morphology, gene expression, and connectivity permit a subdivision of the developing telencephalon into domains that give rise to discrete regions of the adult brain. In mammals, the ventral region of the developing telencephalon can be subdivided into the medial (MGE) and lateral (LGE) ganglionic eminences. The dorsal midline cells give rise to the choroid plexus, and cells in the more lateral domain, the dorsal pallium, give rise to the cerebral cortex. Genetic studies have provided evidence that crossregulatory interactions between transcription factors contribute to the regionalization of the telencephalon. Less is known, however, about the secreted signals that induce the initial dorsoventral character of telencephalic cells. Sonic hedgehog (SHH) is required for the specification of ventral character along the entire anteroposterior (AP) extent of the developing CNS, including the telencephalon. We show that WNT activity imposes an early generic dorsal telencephalic character and that Fibroblast Growth Factor (FGF) act sequentially, and in concert with WNT, to specify cells of definitive dorsal telencephalic character. We also show that retinoic acid (RA)-mediated signaling induces intermediate character in telencephalic cells, and that FGFs maintain cells of ventral character by opposing RA activity. The following model emerges from these findings. At gastrula stages, most or all prospective telencephalic cells become specified as ventral cells in response to node-derived SHH signals. At neural fold- and early neural plate stages, cells in the prospective dorsal and intermediate regions of the telencephalon cells are exposed to WNT signaling that induce a generic dorsal character. The head ectoderm adjacent to the telencephalon then starts to express the retinoic acid producing enzyme, Raldh3, thus exposing telencephalic cells to RA signals. At the same time prospective dorsal cells start to express WNT signals. RA signaling appears to promote the generation of intermediate/prestriatal cells, whereas WNT signal suppress the actions of RA on dorsal cells, which therefore maintain their dorsal character. From the neural plate stage, prospective ventral 6 telencephalic cells are exposed to FGF8 derived from the anterior neural ridge, and FGF8 maintains ventral telencephalic character by opposing the influence of RA signals in ventral cells. At early neural tube stages, the domain of Fgf8 expression expands dorsally and FGF signals derived from the dorsal midline region induce definitive dorsal/precortical cells. In the intermediate region of the telencephalon cells evade high levels of WNT and FGF signals, resulting in an environment in which RA signaling is able to induce prestriatal character.