The transcription factor Pax6 is expressed by progenitors in the ventricular zone (VZ) of dorsal telencephalon (dTel), which generate all cortical glutamatergic neurons, but not by progenitors in the medial ganglionic eminence (MGE), which generate cortical GABAergic interneurons (GABA INs), or the lateral ganglionic eminence (LGE), which generate GABA INs that normally migrate to the olfactory bulb. We show that perinatally, Pax6(sey/sey) mice, which lack functional Pax6 protein, have large subpial ectopias in dTel and ventral telencephalon connected by cell streams arising from an aberrant paraventricular ectopia found throughout dTel. The subpial and paraventricular ectopias and connecting cell streams are comprised of postmitotic neurons expressing markers for GABA INs characteristic of a LGE fate. Marker analyses show that dTel VZ progenitors in Pax6 mutants are progressively ventralized, acquiring expression of regulatory genes normally limited to GE progenitors; by midneurogenesis, the entire dTel VZ exhibits ventralization. This ventralization of the dTel VZ is paralleled by the expression of markers for GABA INs superficial to it, suggesting that it ectopically produces GABA INs, leading to their ectopias and a thinner cortical plate due to diminished production of glutamatergic neurons. Genetic lineage tracing demonstrates that the GABA INs comprising the ectopias are from a cortical Emx1 lineage generated in the dTel VZ, definitively showing that dTel progenitors and progeny acquire a ventral, GE, fate in Pax6 mutants. Thus, Pax6 delimits the appropriate proliferative zone for GABA INs and regulates their numbers and distributions by repressing the ventral fates of dTel progenitors and progeny.