The adult hypothalamus is subdivided into distinct domains: pre‐optic, anterior, tuberal and mammillary. Each domain harbours an array of neurones that act together to regulate homeostasis. The embryonic origins and the development of hypothalamic neurones, however, remain enigmatic. Here, we summarise recent studies in model organisms that challenge current views of hypothalamic development, which traditionally have attempted to map adult domains to correspondingly located embryonic domains. Instead, new studies indicate that hypothalamic neurones arise from progenitor cells that undergo anisotropic growth, expanding to a greater extent than other progenitors, and grow in different dimensions. We describe in particular how a multipotent
Shh
/
Fgf10
‐expressing progenitor population gives rise to progenitors throughout the basal hypothalamus that grow anisotropically and sequentially: first, a subset displaced rostrally give rise to anterior‐ventral/tuberal neuronal progenitors; then a subset displaced caudally give rise to mammillary neuronal progenitors; and, finally, a subset(s) displaced ventrally give rise to tuberal infundibular glial progenitors. As this occurs, stable populations of
Shh
+ive
and
Fgf10
+ive
progenitors form. We describe current understanding of the mechanisms that induce
Shh
+ive
/Fgf10
+ive
progenitors and begin to direct their differentiation to anterior‐ventral/tuberal neuronal progenitors, mammillary neuronal progenitors and tuberal infundibular progenitors. Taken together, these studies suggest a new model for hypothalamic development that we term the “anisotropic growth model”. We discuss the implications of the model for understanding the origins of adult hypothalamic neurones.