The generation of diverse cell types in the neural tube requires inductive signals that are generally derived from tissues adjacent to the neural tube and capable of patterning cell fates at a distance. Shh, a signaling molecule secreted from the notochord and the floor plate, has been shown to induce motor neurons (MN) as well as interneurons, dorsal to the MN, in a concentration-dependent manner. The cellular response to the Shh signal is mediated by receptors, cytoplasmic factors as well as transcription factors, which act both positively and negatively to modulate Shh activity in the patterning of diverse cell types in the ventral neural tube. Additionally, Shh also cooperates with Bmp and Fgf molecules in the control of diverse neuronal cell fates in the brain.