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The thalamocortical tract is the primary source of sensory information to the cerebral cortex, but the mechanisms regulating its pathfinding are not completely understood. LIM-homeodomain (LIM–HD) gene Lhx2 has been proposed to participate in a combinatorial “code” to regulate dorsal thalamic patterning and also the topography of thalamocortical projections. Here, we report that Lhx2−/− embryos exhibit a gross disruption in the early development of the thalamocortical tract, such that thalamic axons are unable to enter the ventral telencephalon. A possible cause for this deficit is a severe reduction of “pioneer” cells in the mutant ventral telencephalon that constitutes a putative mechanism for guiding the entry of the thalamocortical tract into this structure in vivo.However, in vitro, the thalamocortical tract is able to enter the ventral telencephalon, and this permitted an examination of whether thalamocortical topography is normal in the Lhx2 mutant. Contrary to hypotheses that proposed a cell-autonomous role for Lhx2 in the thalamus, Lhx2−/− thalamic explants generate a normal topography of projections in control ventral telencephalic preparations. This is consistent with our findings of normal patterning of the Lhx2 mutant dorsal thalamus using a wide array of markers. In the reverse experiment, however, control thalamic explants display aberrant topography in Lhx2−/− telencephalic preparations. This perturbation is restricted to projections from caudal thalamic explants, while rostral and middle explants project normally.Thus Lhx2 is required for multiple steps in thalamocortical tract pathfinding, but these functions appear localized in the ventral telencephalon rather than in the dorsal thalamic neurons. Furthermore, the absence of Lhx2 in the ventral telencephalon selectively disrupts a subset of thalamic axon topography, indicating a specific rather than a general perturbation of cues in this structure.