Neural precursor cells provide an expandable source of neurons and glia for basic and translational applications. However, little progress has been made in directing naive neural precursors toward specific neuronal fates such as midbrain dopamine (DA) neurons. We have recently demonstrated that transgenic expression of the nuclear orphan receptor Nurr1 is sufficient to drive dopaminergic differentiation of forebrain embryonic rat neural precursors in vitro. However, Nurr1-induced DA neurons exhibit immature neuronal morphologies and functional properties and are unable to induce behavioral recovery in rodent models of Parkinson's disease (PD). Here, we report on the identification of key genetic factors that drive morphological and functional differentiation of Nurr1-derived DA neurons. We show that coexpression of Nurr1, Bcl-XL, and Sonic hedgehog (SHH) or Nurr1 and the proneural bHLH factor Mash1 is sufficient to drive naive rat forebrain precursors into neurons exhibiting the biochemical, electrophysiological, and functional properties of DA neuron in vitro. On transplantation into the striatum of Parkinsonian rats, precursor cells engineered with Nurr1/SHH/Bcl-XL or Nurr1/Mash1 survived in vivo and differentiated into mature DA neurons that can reverse the behavioral deficits in the grafted animals.