In the cerebral cortex, GABAergic interneurons have evolved as a highly heterogeneous collection of cell types that are characterized by their unique spatial and temporal capabilities to influence neuronal circuits. Current estimates suggest that up to 50 different types of GABAergic neurons may populate the cerebral cortex, all derived from progenitor cells in the subpallium, the ventral aspect of the embryonic telencephalon. In this review, we provide an overview of the mechanisms underlying the generation of the distinct types of interneurons and their integration in cortical circuits. Interneuron diversity seems to emerge through the implementation of cell-intrinsic genetic programs in progenitor cells, which unfold over a protracted period of time until interneurons acquire mature characteristics. The developmental trajectory of interneurons is also modulated by activity-dependent, non-cell-autonomous mechanisms that influence their ability to integrate in nascent circuits and sculpt their final distribution in the adult cerebral cortex.