MASH1 is a bHLH transcription factor specifically expressed in the developing nervous system that has an essential role in the formation of multiple neuronal lineages in the peripheral and central nervous systems. Here we demonstrate the requirement for MASH1 for normal development of ventral forebrain structures. MASH1 is expressed at high levels in the ventral telencephalon and specific regions within the ventral diencephalon. In the absence of MASH1, tissue morphology, proliferation, and gene expression within these forebrain regions is disrupted. The decreased incorporation of BrdU in the neuroepithelium and the enlargement of the ventricles demonstrate a reduction in cell proliferation. A loss of anatomically distinct lateral and medial ganglionic eminences, and a disruption of axons traversing this region, indicate abnormalities in cell-type specification. The aberrant expression of Tuj-1, a marker of neuronal differentiation in the neuroepithelium, and Dlx, a marker of regional cell identity, in the ventricular zone in the MASH1 mutant brains suggest coordination of differentiation events is disrupted. In addition, the involvement of MASH1 in lateral inhibition processes that affect the development of these forebrain regions is implicated. Taken together, an essential role for MASH1 in the coordination of events required for correct cell-type specification and timing of differentiation during neural development in ventral forebrain regions is demonstrated.