In the developing hypothalamus, a variety of neurons are generated adjacent to each other in a highly coordinated, but poorly understood process. A critical question that remains unanswered is how coordinated development of multiple neuronal types is achieved in this relatively narrow anatomical region. We focus on dopaminergic (DA) and oxytocinergic (OT) neurons as a paradigm for development of two prominent hypothalamic cell types. We report that the development of DA and OT-like neurons in the zebrafish is orchestrated by two novel pathways that regulate the expression of the homeodomain-containing protein Orthopedia (Otp), a key determinant of hypothalamic neural differentiation. Genetic analysis showed that the G-protein-coupled receptor PAC1 and the zinc finger-containing transcription factor Fezl act upstream to Otp. In vivo and in vitro experiments demonstrated that Fezl and PAC1 regulate Otp at the transcriptional and the post-transcriptional levels, respectively. Our data reveal a new genetic network controlling the specification of hypothalamic neurons in vertebrates, and places Otp as a critical determinant underlying Fezl- and PAC1-mediated differentiation.