In the Drosophila embryo, the central nervous system (CNS) develops from a population of neural stem cells (neuroblasts) and midline progenitor cells. Here, the fate and extent of determination of CNS progenitors along the dorsoventral axis was assayed. Dorsal neuroectodermal cells transplanted into the ventral neuroectoderm or into the midline produced CNS lineages consistent with their new position. However, ventral neuroectodermal cells and midline cells transplanted to dorsal sites of the neuroectoderm migrated ventrally and produced CNS lineages consistent with their origin. Thus, inductive signals at the ventral midline and adjacent neuroectoderm may confer ventral identities to CNS progenitors as well as the ability to assume and maintain characteristic positions in the developing CNS. Furthermore, ectopic transplantations of wild-type midline cells into single minded (sim) mutant embryos suggest that the ventral midline is required for correct positioning of the cells.