We identified the LIM homeodomain transcription factor Lmx1b in the mesencephalic dopamine (mesDA) systems of embryos and adults. Analysis of spatiotemporal expression in Lmx1b null mutants and wild-type mice implicated a cascade involving Lmx1b in the early development of mesDA neurons. Although disruption of this cascade did not block induction of tyrosine hydroxylase (TH), a key enzyme in DA synthesis, or Nurr1, a nuclear hormone receptor, Lmx1b knockout mice failed to induce the mesDA-specific homeodomain gene Ptx3 in TH-positive neurons. Eventually, this small set of TH-positive neurons was lost during embryonic maturation. The data suggest that at least two molecular cascades operate during the specification of the mesDA system, one specifying neurotransmitter phenotype and another essential for other aspects of mesDA neuron differentiation.