Diversification of neuron classes is essential for functions of the olfactory system, but the underlying mechanisms that generate individual olfactory neuron types are only beginning to be understood. Here we describe a role of the highly conserved HMG-box transcription factor SOX-2 in postmitotic specification and alternative differentiation of the Caenorhabditis elegans AWC and AWB olfactory neurons. We show that SOX-2 partners with different transcription factors to diversify postmitotic olfactory cell types. SOX-2 functions cooperatively with the OTX/OTD transcription factor CEH-36 to specify an AWC "ground state," and functions with the LIM homeodomain factor LIM-4 to suppress this ground state and drive an AWB identity instead. Our findings provide novel insights into combinatorial codes that drive terminal differentiation programs in the nervous system and reveal a biological function of the deeply conserved Sox2 protein that goes beyond its well-known role in stem cell biology.