Cortical interneurons originating in the embryonic medial ganglionic eminence (MGE) diverge into a range of different subtypes found in the adult mouse cerebral cortex. The mechanisms underlying this divergence and the timing when subtype identity is set up remain unclear. We identify the highly conserved transcriptional co-factor MTG8 as being pivotal in the development of a large subset of MGE cortical interneurons that co-expresses Somatostatin (SST) and Neuropeptide Y (NPY). MTG8 interacts with the pan-MGE transcription factor LHX6 and together the two factors are sufficient to promote expression of critical cortical interneuron subtype identity genes. The SST-NPY cortical interneuron fate is initiated early, well before interneurons migrate into the cortex, demonstrating an early onset specification program. Our findings suggest that transcriptional co-factors and modifiers of generic lineage specification programs may hold the key to the emergence of cortical interneuron heterogeneity from the embryonic telencephalic germinal zones.