Recent studies have identified several factors that influence the development of midbrain dopamine (DA) neurons. The identity of early proliferating DA progenitor cells are specified by the secreted factors sonic hedgehog and fibroblast growth factor 8, derived from the floor plate of the ventral midline and the mid/hindbrain border, respectively. While transcription factors specifically expressed in the proliferating DA progenitor cells remain to be identified, several transcription factors important for postmitotic DA cell development have been characterized. These include Nurr1, Lmx1b, Pitx3, and En1/En2. The studies of these transcription factors have not only increased the understanding of how DA neurons are generated in vivo, but also allowed the development of new strategies using stem cells for engineering DA neurons in vitro, results that may have significance in future therapies of patients with Parkinson's disease.