Striatal medium spiny neurons (MSN) are critically involved in motor control, and their degeneration is a principal component of Huntington's disease. We find that the transcription factor Ctip2 (also known as Bcl11b) is central to MSN differentiation and striatal development. Within the striatum, it is expressed by all MSN, although it is excluded from essentially all striatal interneurons. In the absence of Ctip2, MSN do not fully differentiate, as demonstrated by dramatically reduced expression of a large number of MSN markers, including DARPP-32, FOXP1, Chrm4, Reelin, MOR1 (mu-opioid receptor 1), glutamate receptor 1, and Plexin-D1. Furthermore, MSN fail to aggregate into patches, resulting in severely disrupted patch-matrix organization within the striatum. Finally, heterotopic cellular aggregates invade the Ctip2-/- striatum, suggesting a failure by MSN to repel these cells in the absence of Ctip2. This is associated with abnormal dopaminergic innervation of the mutant striatum and dramatic changes in gene expression, including dysregulation of molecules involved in cellular repulsion. Together, these data indicate that Ctip2 is a critical regulator of MSN differentiation, striatal patch development, and the establishment of the cellular architecture of the striatum.