Cerebral cortex is comprised of regions, including six-layer neocortex and three-layer olfactory cortex, generated by telencephalic progenitors of an Emx1 lineage. The mechanism specifying region-specific subpopulations in this lineage is unknown. We found that the LIM homeodomain transcription factor Lhx2 in mice, expressed in graded levels by progenitors, determines their regional identity and fate decisions to generate neocortex or olfactory cortex. Deletion of Lhx2 with Emx1-cre at embryonic day 10.5 (E10.5) altered the fates of progenitors, causing them to generate three-layer cortex, phenocopying olfactory cortex rather than lateral neocortex. Progenitors did not generate ectopic olfactory cortex following Lhx2 deletion at E11.5. Thus, Lhx2 regulates a regional-fate decision by telencephalic progenitors during a critical period that ends as they differentiate from neuroepithelial cells to neuronogenic radial glia. These findings establish a genetic mechanism for determining regional-fate in the Emx1 lineage of telencephalic progenitors that generate cerebral cortex.