Recent studies revealed new insights into the development of a unique caudal forebrain-signaling center: the zona limitans intrathalamica (zli). The zli is the last brain signaling center to form and the first forebrain compartment to be established. It is the only part of the dorsal neural tube expressing the morphogen Sonic Hedgehog (Shh) whose activity participates in the survival, growth and patterning of neuronal progenitor subpopulations within the thalamic complex. Here, we review the gene regulatory network of transcription factors and cis-regulatory elements that underlies formation of a shh-expressing delimitated domain in the anterior brain. We discuss evidence that this network predates the origin of chordates. We highlight the contribution of Shh, Wnt and Notch signaling to zli development and discuss implications for the fact that the morphogen Shh relies on primary cilia for signal transduction. The network that underlies zli development also contributes to thalamus induction, and to its patterning once the zli has been set up. We present an overview of the brain malformations possibly associated with developmental defects in this gene regulatory network (GRN).