Gamma-aminobutyric acid-containing (GABAergic) interneurons play an important role in the function of the cerebral cortex. Through mostly inhibitory mechanisms, interneurons control hyperexcitability, and synchronize and shape the spatiotemporal dynamics of cortical activity underlying various brain functions. Their influence on cortical function is remarkably diverse, a reflection of the large variety of interneuronal populations that exist in the mammalian cortex. Research over the past few years has rapidly transformed our understanding of their mechanisms underlying the generation of different classes of interneurons. In this review, we summarize recent progress on this process, progress which holds the promise of providing a rational framework for their classification, as well as means to understand their role in cortical processing.