Dorsal horn neurons in the spinal cord integrate and relay sensory information. Here, we show that the expression of the homeobox gene Lbx1 distinguishes two major neuronal classes generated in the dorsal spinal cord. The Lbx1⁻ (class A) and Lbx1⁺ (class B) neurons differ in their dependence on roof plate BMP signals for specification and settle in the deep and superficial dorsal horn, respectively. Lbx1 misexpression blocks the differentiation of class A neurons. Conversely, in Lbx1 mutant mice, class B neurons assume the identity of class A neurons. As a consequence, the morphology and neuronal circuitry of the dorsal horn are aberrant. We conclude that Lbx1 distinguishes two major neuronal classes in the dorsal spinal cord and is an important determinant of their distinct differentiation programs.