GABAergic neurons of the hypothalamus regulate many innate behaviors, but little is known about the mechanisms that control their development. We previously identified hypothalamic neurons that express the LIM homeodomain transcription factor Lhx6, a master regulator of cortical interneuron development, as sleep-promoting. In contrast to telencephalic interneurons, hypothalamic Lhx6 neurons do not undergo long-distance tangential migration and do not express cortical interneuronal markers such as Pvalb. Here, we show that Lhx6 is necessary for the survival of hypothalamic neurons. Dlx1/2, Nkx2-2, and Nkx2-1 are each required for specification of spatially distinct subsets of hypothalamic Lhx6 neurons, and that Nkx2-2+/Lhx6+ neurons of the zona incerta are responsive to sleep pressure. We further identify multiple neuropeptides that are enriched in spatially segregated subsets of hypothalamic Lhx6 neurons, and that are distinct from those seen in cortical neurons. These findings identify common and divergent molecular mechanisms by which Lhx6 controls the development of GABAergic neurons in the hypothalamus.