Caenorhabditis elegans responds to its complex chemical environment using a small number of chemosensory neurons. Each of these neurons exhibits a unique sensory response repertoire. The developmental mechanisms that generate this diversity of function are largely unknown. Many C. elegans chemosensory neurons, including the AWA and ASG neurons, arise as lineal sisters of an asymmetric division. Here we describe the gene unc-130, which plays a role in the generation of the AWA and ASG neurons. In unc-130 mutants, the ASG neurons adopt the fate of the AWA neurons. unc-130 encodes a member of the forkhead domain family of transcription factors, and is expressed in the precursors to AWA and ASG neurons. Misexpression of unc-130 in the AWA neurons is partly sufficient to repress the AWA fate, but not to promote ASG fate. unc-130 also plays a role in the development of additional chemosensory neurons. Our experiments show that the ASG neurons share a developmental default state in common with three types of olfactory neurons. We propose that distinct cell fates and hence diversity of function in the chemosensory neurons of C. elegans are generated in a hierarchical manner, utilizing both lineage-dependent and independent mechanisms.