The development of the thalamus was examined in normal and X-irradiated embryos from day 13 (E13) to the day before birth (E22). The differentiating, radioresistant neurons of the lateral habenular nucleus, derived from a portion of the superior neuroepithelial lobule (SL1), were settling by day E15 and by this time the habenulopeduncular tract was forming. The neurons of the reticular nucleus, derived from the middle neuroepithelial lobe, began to settle on day E15 but a massive migration was still evident on day E16. Adjacent to the reticular nucleus the internal capsule appeared on day E16; this fiber bundle seemed to be continuous with fibers embedded in the first transitory zone of cells issuing from the dorsal neuroepithelial lobe. Because of the immaturity of the neocortex at this time, it was postulated that thalamocortical fibers of the dorsal thalamus are the earliest components of the internal capsule. By day E17 all the sensory relay nuclei of the thalamus were recognizable and it was assumed that the second transitory zone issuing from the receding dorsal neuroepithelial lobe contained the neurons of the later forming intralaminar nuclei. Suggestive evidence was obtained that the late arising neurons of the medial thalamus (the anterior nuclei, the mediodorsal nucleus, and some or all of the midline nuclei) originate in a portion of the superior neuroepithelial lobule designated as SL2. Our present and previous studies showed that the major divisions of the hypothalamus and thalamus are derived embryonically from distinguishable parts of the third ventricle neuroepithelium. This implies the te third ventricle neuroepithelium has a "mosaic" organization and suggests that the fate of hypothalamic and thalamic neurons may be determined to some extent while their precursors are still proliferating.