Forging a relationship between progenitors with dynamically changing gene expression and their terminal fate is instructive for understanding the logic of how cell-type diversity is established. The mouse spinal cord is an ideal system to study these mechanisms in the context of developmental genetics and nervous system development. Here we focus on the Gastrulation homeobox 2 (Gbx2) transcription factor, which has not been explored in spinal cord development.We determined the molecular identity of Gbx2-expressing spinal cord progenitors. We also utilized genetic inducible fate mapping to mark the Gbx2 lineage at different embryonic stages in vivo in mouse. Collectively, we uncover cell behaviors, cytoarchitectonic organization, and the terminal cell fate of the Gbx2 lineage. Notably, both ventral motor neurons and interneurons are derived from the Gbx2 lineage, but only during a short developmental period. Short-term fate mapping during mouse spinal cord development shows that Gbx2 expression is transient and is extinguished ventrally in a rostral to caudal gradient. Concomitantly, a permanent lineage restriction boundary ensures that spinal cord neurons derived from the Gbx2 lineage are confined to a dorsal compartment that is maintained in the adult and that this lineage generates inhibitory interneurons of the spinal cord. Using lineage tracing and molecular markers to follow Gbx2-mutant cells, we show that the loss of Gbx2 globally affects spinal cord patterning including the organization of interneuron progenitors. Finally, long-term lineage analysis reveals that the presence and timing of Gbx2 expression in interneuron progenitors results in the differential contribution to subtypes of terminally differentiated interneurons in the adult spinal cord.We illustrate the complex cellular nature of Gbx2 expression and lineage contribution to the mouse spinal cord. In a broader context, this study provides a direct link between spinal cord progenitors undergoing dynamic changes in molecular identity and terminal neuronal fate.