The mammalian striatum controls sensorimotor and psychoaffective functions through coordinated activities of its two striatonigral and striatopallidal output pathways. Here we show that retinoic acid receptor beta (RAR beta) controls development of a subpopulation of GABAergic, Gad65-positive striatonigral projection neurons. In Rarb(-/-) knock-out mice, concomitant reduction of Gad65, dopamine receptor D1 (Drd1), and substance P expression at different phases of prenatal development was associated with reduced number of Drd1-positive cells at birth, in contrast to normal numbers of striatopallidal projection neurons expressing dopamine receptor D2. Fate mapping using BrdU pulse-chase experiments revealed that such deficits may originate from compromised proliferation of late-born striosomal neurons and lead to decreased number of Drd1-positive cells retaining BrdU in postnatal day (P) 0 Rarb(-/-) striatum. Reduced expression of Fgf3 in the subventricular zone of the lateral ganglionic eminence (LGE) at embryonic day 13.5 may underlie such deficits by inducing premature differentiation of neuronal progenitors, as illustrated by reduced expression of the proneural gene Ascl1(Mash1) and increased expression of Meis1, a marker of postmitotic LGE neurons. In agreement with a critical role of FGF3 in this control, reduced number of Ascl1-expressing neural progenitors, and a concomitant increase of Meis1-expressing cells, were observed in primary cell cultures of Rarb(-/-) LGE. This defect was normalized by addition of fibroblast growth factor (FGF). Such data point to role of Meis1 in striatal development, also supported by reduced neuronal differentiation in the LGE of Meis1(-/-) embryos. Our data unveil a novel mechanism of development of striatonigral projection neurons involving retinoic acid and FGF, two signals required for positioning the boundaries of Meis1-expressing cells.