ARX loss-of-function mutations cause X-linked lissencephaly with ambiguous genitalia (XLAG), a severe neurological condition that results in profound brain malformations, including microcephaly, absence of corpus callosum, and impairment of the basal ganglia. Despite such dramatic defects, their nature and origin remain largely unknown. Here, we used Arx mutant mice as a model to characterize the cellular and molecular mechanisms underlying the basal ganglia alterations. In these animals, the early differentiation of this tissue appeared normal, whereas subsequent differentiation was impaired, leading to the periventricular accumulation of immature neurons in both the lateral ganglionic eminence and medial ganglionic eminence (MGE). Both tangential migration toward the cortex and striatum and radial migration to the globus pallidus and striatum were greatly reduced in the mutants, causing a periventricular accumulation of NPYϩ or calretininϩ neurons in the MGE. Arx mutant neurons retained their differentiation potential in vitro but exhibited deficits in morphology and migration ability. These findings imply that cell-autonomous defects in migration underlie the neuronal localization defects. Furthermore, Arx mutants lacked a large fraction of cholinergic neurons and displayed a strong impairment of thalamocortical projections, in which major axon fiber tracts failed to traverse the basal ganglia. Altogether, these results highlight the critical functions of Arx in promoting neural migration and regulating basal ganglia differentiation in mice, consistent with the phenotype of XLAG patients.