Generating diverse neurons in the central nervous system involves three major steps. First, heterogeneous neural progenitors are specified by positional cues at early embryonic stages. Second, neural progenitors sequentially produce neurons or intermediate precursors that acquire different temporal identities based on their birth-order. Third, sister neurons produced during asymmetrical terminal mitoses are given distinct fates. Determining the molecular mechanisms underlying each of these three steps of cellular diversification will unravel brain development and evolution. Drosophila has a relatively simple and tractable CNS, and previous studies on Drosophila CNS development have greatly advanced our understanding of neuron fate specification. Here we review those studies and discuss how the lessons we have learned from fly teach us the process of neuronal diversification in general.