Distinct classes of neurons arise at different positions along the dorsal-ventral axis of the spinal cord leading to spinal neurons being segregated along this axis according to their physiological properties and functions. Thus, the neurons associated with motor control are generally located in, or adjacent to, the ventral horn whereas the interneurons (INs) that mediate sensory activities are present within the dorsal horn. Here, we review classic and recent studies examining the developmental mechanisms that establish the dorsal-ventral axis in the embryonic spinal cord. Intriguingly, while the cellular organization of the dorsal and ventral halves of the spinal cord looks superficially similar during early development, the underlying molecular mechanisms that establish dorsal vs ventral patterning are markedly distinct. For example, the ventral spinal cord is patterned by the actions of a single growth factor, sonic hedgehog (Shh) acting as a morphogen, i.e., concentration-dependent signal. Recent studies have shed light on the mechanisms by which the spatial and temporal gradient of Shh is transduced by cells to elicit the generation of different classes of ventral INs, and motor neurons (MNs). In contrast, the dorsal spinal cord is patterned by the action of multiple factors, most notably by members of the bone morphogenetic protein (BMP) and Wnt families. While less is known about dorsal patterning, recent studies have suggested that the BMPs do not act as morphogens to specify dorsal IN identities as previously proposed, rather each BMP has signal-specific activities. Finally, we consider the promise that elucidation of these mechanisms holds for neural repair.