During early telencephalic development, the major portion of the ventral telencephalic (subpallial) region becomes subdivided into three regions, the lateral (LGE), medial (MGE), and caudal (CGE) ganglionic eminences. In this study, we systematically recapitulated subpallial patterning in mouse embryonic stem cell (ESC) cultures and investigated temporal and combinatory actions of patterning signals. In serum-free floating culture, the dorsal-ventral specification of ESC-derived telencephalic neuroectoderm is dose-dependently directed by Sonic hedgehog (Shh) signaling. Early Shh treatment, even before the expression onset of Foxg1 (also Bf1; earliest marker of the telencephalic lineage), is critical for efficiently generating LGE progenitors, and continuous Shh signaling until day 9 is necessary to commit these cells to the LGE lineage. When induced under these conditions and purified by fluorescence-activated cell sorter, telencephalic cells efficiently differentiated into Nolz1(+)/Ctip2(+) LGE neuronal precursors and subsequently, both in culture and after in vivo grafting, into DARPP32(+) medium-sized spiny neurons. Purified telencephalic progenitors treated with high doses of the Hedgehog (Hh) agonist SAG (Smoothened agonist) differentiated into MGE- and CGE-like tissues. Interestingly, in addition to strong Hh signaling, the efficient specification of MGE cells requires Fgf8 signaling but is inhibited by treatment with Fgf15/19. In contrast, CGE differentiation is promoted by Fgf15/19 but suppressed by Fgf8, suggesting that specific Fgf signals play different, critical roles in the positional specification of ESC-derived ventral subpallial tissues. We discuss a model of the antagonistic Fgf8 and Fgf15/19 signaling in rostral-caudal subpallial patterning and compare it with the roles of these molecules in cortical patterning.