Cajal–Retzius (C-R) cells play important roles in the lamination of the mammalian cortex via reelin secretion. The genetic mechanisms underlying the development of these neurons have just begun to be unraveled. Here, we show that two closely related LIM-homeobox genesLhx1andLhx5are expressed inreelin+cells in various regions in the mouse telencephalon at or adjacent to sites where the C-R cells are generated, including the cortical hem, the mantle region of the septal/retrobulbar area, and the ventral pallium. WhereasLhx5is expressed in all of these reelin-expressing domains,Lhx1is preferentially expressed in the septal area and in a continuous domain spanning from lateral olfactory region to caudomedial territories. Genetic ablation ofLhx5results in decreasedreelin+andp73+cells in the neocortical anlage, in the cortical hem, and in the septal, olfactory, and caudomedial telencephalic regions. The overall reduction in number of C-R cells inLhx5mutants is accompanied by formation of ectopicreelin+cell clusters at the caudal telencephalon. Based on differential expression of molecular markers and by fluorescent cell tracing in cultured embryos, we located the origin of reelin+ectopic cell clusters at the caudomedial telencephalic region. We also confirmed the existence of a normal migration stream of reelin+cells from the caudomedial area to telencephalic olfactory territories in wild-type embryos. These results reveal a complex role forLhx5in regulating the development and normal distribution of C-R cells in the developing forebrain.