The Drosophila ventral nerve cord has been a central model system for studying the molecular genetic mechanisms that control CNS development. Studies show that the generation of neural diversity is a multistep process initiated by the patterning and segmentation of the neuroectoderm. These events act together with the process of lateral inhibition to generate precursor cells (neuroblasts) with specific identities, distinguished by the expression of unique combinations of regulatory genes. The expression of these genes in a given neuroblast restricts the fate of its progeny, by activating specific combinations of downstream genes. These genes in turn specify the identity of any given postmitotic cell, which is evident by its cellular morphology and choice of neurotransmitter.