In this study, we provide a detailed description of the method for the stepwise and combinatorial treatment of developmentally relevant signaling molecules to efficiently generate MGE vs. CGE cells from hPSCs. In this protocol, we first ventralize early neuroectoderm using SHH activation and Wnt inhibition, followed by further rostralization and caudalization of ventralized neuroectoderm using FGF8 vs. FGF19 signaling activation to induce MGE vs. CGE phenotype. This highly efficient method, which recapitulates early developmental processes, will help accelerate the realization of the full potential of induced pluripotent stem cell (iPSC) technology in the study of disease mechanisms and the development of novel therapeutics.