The identification of small molecules capable of directing pluripotent cell differentiation towards specific lineages is highly desirable to both reduce cost, and increase efficiency. Within neural progenitors, LIM homeobox transcription factor 1 alpha (Lmx1a) is required for proper development of roof plate and cortical hem structures of the forebrain, as well as the development of floor plate and midbrain dopaminergic neurons. In this study we generated homologous recombinant cell lines expressing either luciferase or β-lactamase under the control of the Lmx1a promoter, and used these cell lines to investigate kinase-mediated regulation of Lmx1a activity during neuronal differentiation. A screen of 143 small molecule tyrosine kinase inhibitors yielded 16 compounds that positively or negatively modulated Lmx1a activity. Inhibition of EGF, VEGF and DNA-dependent protein kinase (DNA-PK) signaling significantly upregulated Lmx1a activity whereas MEK inhibition strongly downregulated its activity. Quantitative FACS analysis revealed that the DNA-PK inhibitor significantly increased the number of Lmx1a+ progenitors while subsequent qPCR showed an upregulation of Notch effectors, the basic helix-loop-helix genes, Hes5 and Hey1. FACS further revealed that DNA-PK-mediated regulation of Lmx1a+ cells is dependent on the rapamycin-sensitive complex, mTORC1. Interestingly, this DNA-PK inhibitor effect was preserved in a co-culture differentiation protocol. Terminal differentiation assays showed that DNA-PK inhibition shifted development of neurons from forebrain toward midbrain character as assessed by Pitx3/TH immunolabeling and corresponding upregulation of midbrain (En1), but not forebrain (FoxG1) transcripts. These studies show that Lmx1a signaling in mouse embryonic stem cells contributes to a molecular cascade establishing neuronal specification. The data presented here identifies a novel regulatory pathway where signaling from DNA-PK appears to suppress midbrain-specific Lmx1a expression.