SIM1 is a transcription factor essential for the developmental expression of the endocrine hormone genes, e.g. vasopressin (Vp) and oxytocin (Ot), in the paraventricular nucleus (PVN) and supraoptic nucleus (SON) of the hypothalamus. Mice mutant for Sim1 lack structural PVN and SON, attributed in previous studies to the death of the PVN/SON progenitor cells. Here, we use a tau-LacZ knock-in allele at the Sim1 locus to trace Sim1 mutant cells and show that they are generated normally and survive to birth, contrasting to the previous proposal. Mutant cells adopt neuronal characteristics and maintain their PVN/SON identity as they continue to express PVN/SON progenitor markers. However, they occupy an ectopic position between the normal PVN and SON, indicating a defect in neuronal migration. To explore candidate molecular cues that contribute to PVN/SON neuronal migration, we focused on the Plexin family of genes. We found that PlexinA1 is expressed in regions surrounding the PVN and SON, whereas PlexinC1 is expressed within the PVN and SON. PlexinA1 expression becomes up-regulated in Sim1 mutant cells, whereas PlexinC1 expression is down-regulated. Finally, the PlexinC1 mutant has a selective defect in partitioning the VP and OT neurons coherently into the PVN and SON. Together, our results uncover a transcriptional regulation of neuronal migration cues initiated by Sim1 that contribute to the organization of the PVN and SON.