Dorsal spinal neurogenesis is orchestrated by the combined action of signals secreted from the roof plate organizer and a downstream transcriptional cascade. Within this cascade, Msx1 and Msx2, two homeodomain transcription factors (TFs), are induced earlier than bHLH neuralizing TFs. Whereas bHLH TFs have been shown to specify neuronal cell fate, the function of Msx genes remains poorly defined. We describe dramatic alterations of neuronal patterning in Msx1/Msx2 double-mutant mouse embryos. The most dorsal spinal progenitor pool fails to express the bHLH neuralizing TF Atoh1, which results in a lack of Lhx2-positive and Barhl2-positive dI1 interneurons. Neurog1 and Ascl1 expression territories are dorsalized, leading to ectopic dorsal differentiation of dI2 and dI3 interneurons. In proportion, the amount of Neurog1-expressing progenitors appears unaffected, whereas the number of Ascl1-positive cells is increased. These defects occur while BMP signaling is still active in the Msx1/ Msx2 mutant embryos. Cell lineage analysis and co-immunolabeling demonstrate that Atoh1-positive cells derive from progenitors expressing both Msx1 and Msx2. In vitro, Msx1 and Msx2 proteins activate Atoh1 transcription by specifically interacting with several homeodomain binding sites in the Atoh1 3′ enhancer. In vivo, Msx1 and Msx2 are required for Atoh1 3′ enhancer activity and ChIP experiments confirm Msx1 binding to this regulatory sequence. These data support a novel function of Msx1 and Msx2 as transcriptional activators. Our study provides new insights into the transcriptional control of spinal cord patterning by BMP signaling, with Msx1 and Msx2 acting upstream of Atoh1.