The hypothalamus controls temperature, hunger and many other physiological functions in animals, but the signals that control the development of hypothalamic neurons are poorly understood. Ohyama and colleagues remedy this by reporting that the sequential action of sonic hedgehog (Shh) and bone morphogenetic protein 7 (Bmp7) directs the differentiation of hypothalamic dopaminergic neurons in chick embryos (see p. 5185). By examining the expression of hypothalamic regional markers in embryo explants exposed to Shh and Bmp7, and to inhibitors of these molecules, the researchers show that the induction of dopaminergic neuron identity is initiated by Shh signalling. Bmp7 then acts on cells that have been ventralised by Shh, including unexpectedly postmitotic cells, to generate hypothalamic neurons. Finally, the researchers report that Shh and Bmp7 in combination are sufficient to direct neural progenitors derived from mouse embryonic stem cells to a hypothalamic dopaminergic fate.