The prospect of using cell replacement therapies has raised the key issue of whether elucidation of developmental pathways can facilitate the generation of therapeutically important cell types from stem cells. Here we show that the homeodomain proteins Lmx1a and Msx1 function as determinants of midbrain dopamine neurons, cells that degenerate in patients with Parkinson's disease. Lmx1a is sufficient and required to trigger dopamine cell differentiation. An early activity of Lmx1a is to induce the expression of Msx1, which complements Lmx1a by inducing the proneural protein Ngn2 and neuronal differentiation. Importantly, expression of Lmx1a in embryonic stem cells results in a robust generation of dopamine neurons with a "correct" midbrain identity. These data establish that Lmx1a and Msx1 are critical intrinsic dopamine-neuron determinants in vivo and suggest that they may be essential tools in cell replacement strategies in Parkinson's disease.