We review investigations that have lead to a model of how the ventral spinal cord of higher vertebrate embryos is patterned during development. Central to this model is the secreted morphogen protein, Sonic hedgehog. There is now considerable evidence that this molecule acts in a concentration-dependent manner to direct the development of the spinal cord. Recent studies have suggested that two classes of homeodomain proteins are induced by threshold concentrations of Sonic hedgehog. Reciprocal inhibition between the two classes acts to convert the continuous gradient of Sonic hedgehog into defined domains of transcription factor expression. However, a number of aspects of ventral spinal cord patterning remain to be elucidated. Some issues currently under investigation involve temporal aspects of Shh-signalling, the role of other signals in ventral patterning and the characterisation of ventral interneurons. In this review, we discuss the current state of knowledge of these issues and present some preliminary studies aimed at furthering understanding of these processes in spinal cord patterning.