Interneurons are born in subcortical germinative zones and tangentially migrate in multiple streams above and below the developing cortex, and then, at the appropriate developmental stage, migrate radially into the cortex. The factors that control the formation of and the timing of exit from the streams remain obscure; moreover, the rationale for this complicated developmental plan is unclear. We show that a chemokine, Cxcl12, is an attractant for interneurons during the stage of stream formation and tangential migration. Furthermore, the timing of exit from the migratory streams accompanies loss of responsiveness to Cxcl12 as an attractant. Mice with mutations in Cxcr4 have disorganized migratory streams and deletion of Cxcr4 after the streams have formed precipitates premature entry into the cortical plate. In addition, constitutive deletion of Cxcr4 specifically in interneurons alters the regional distribution of interneurons within the cortex and leads to interneuron laminar positioning defects in the postnatal cortex. To examine the role of interneuron distribution on the development of cortical circuitry, we generated mice with focal defects in interneuron distribution and studied the density of postnatal inhibitory innervation in areas with too many and too few interneurons. Interestingly, alterations in IPSC frequency and amplitude in areas with excess interneurons tend toward normalization of inhibitory tone, but in areas with reduced interneuron density this system fails. Thus, the processes controlling interneuron sorting, migration, regional distribution, and laminar positioning can have significant consequences for the development of cortical circuitry and may have important implications for a range of neurodevelopmental disorders.