The severe disorders associated with a loss or dysfunction of midbrain dopamine neurons (DNs) have intensified research aimed at deciphering developmental programs controlling midbrain development. The homeodomain proteins Lmx1a and Lmx1b are important for the specification of DNs during embryogenesis, but it is unclear to what degree they may mediate redundant or specific functions. Here, we provide evidence showing that DN progenitors in the ventral midbrain can be subdivided into molecularly distinct medial and lateral domains, and these subgroups show different sensitivity to the loss of Lmx1a and Lmx1b. Lmx1a is specifically required for converting non-neuronal floor-plate cells into neuronal DN progenitors, a process that involves the establishment of Notch signaling in ventral midline cells. On the other hand, lateral DN progenitors that do not appear to originate from the floor plate are selectively ablated in Lmx1b mutants. In addition, we also reveal an unanticipated role for Lmx1b in regulating Phox2a expression and the sequential specification of ocular motor neurons (OMNs) and red nucleus neurons (RNNs) from progenitors located lateral to DNs in the midbrain. Our data therefore establish that Lmx1b influences the differentiation of multiple neuronal subtypes in the ventral midbrain, whereas Lmx1a appears to be exclusively devoted to the differentiation of the DN lineage.