The hypothalamus is a key integrative centre in the vertebrate brain that regulates many essential functions, including homeostasis and stress responses. Several transcription factors that are essential for hypothalamic development have been identified but the production of diverse neuron types in this complex brain region is poorly understood. Here (p. 1762), Andrea Wolf and Soojin Ryu identify the transcription factors required for the specification of two distinct neuron types in the zebrafish posterior hypothalamus. They show that the transcription factor Fezf2 is important for the early development of the posterior hypothalamus. Furthermore, the differential expression of Fezf2, Otp, Foxb1.2 and Sim1a defines distinct subdomains in the posterior hypothalamus during neuronal specification. The neuron types that produce the hypothalamic hormones Vasoactive intestinal peptide (Vip) and Urotensin 1 (Uts1) develop in these different subdomains, they report, and Vip neuron specification requires Otp and Sim1a whereas Uts1 neuron specification requires Fezf2, Sim1a and Foxb1.2. Together, these findings provide mechanistic insights into the generation of neuronal diversity in the hypothalamus.