In the caudal neural tube, oligodendrocyte progenitors (OLPs) originate in the ventral neuroepithelium under the influence of Sonic hedgehog (SHH), then migrate throughout the spinal cord and brainstem before differentiating into myelin-forming cells. We present evidence that oligodendrogenesis in the anterior neural tube follows a similar pattern. We show that OLPs in the embryonic mouse forebrain express platelet-derived growth factor alpha-receptors (PDGFRA), as they do in more caudal regions. They first appear within a region of anterior hypothalamic neuroepithelium that co-expresses mRNA encoding SHH, its receptor PTC1 (PTCH) and the transcription factors OLIG1, OLIG2 and SOX10. Pdgfra-positive progenitors later spread through the forebrain into areas where Shh is not expressed, including the cerebral cortex. Cyclopamine inhibited OLP development in cultures of mouse basal forebrain, suggesting that hedgehog (HH) signalling is obligatory for oligodendrogenesis in the ventral telencephalon. Moreover, Pdgfra-positive progenitors did not appear on schedule in the ventral forebrains of Nkx2.1 null mice, which lack the telencephalic domain of Shh expression. However, OLPs did develop in cultures of Nkx2.1^−/− basal forebrain and this was blocked by cyclopamine. OLPs also developed in neocortical cultures, even though Shh transcripts could not be detected in the embryonic cortex. Here, too, the appearance of OLPs was suppressed by cyclopamine. In keeping with these findings, we detected mRNA encoding SHH and Indian hedgehog (IHH) in both Nkx2.1^−/− basal forebrain cultures and neocortical cultures. Overall, the data are consistent with the idea that OLPs in the telencephalon, possibly even some of those in the cortex, develop under the influence of SHH in the ventral forebrain.