The thalamus is a diencephalic structure that plays crucial roles in relaying and modulating sensory and motor information to the neocortex. The thalamus develops in the dorsal part of the neural tube at the level of the caudal forebrain. However, the molecular mechanisms that are essential for thalamic differentiation are still unknown. Here, we have succeeded in generating thalamic neurons from mouse embryonic stem cells (mESCs) by modifying the default method that induces the most-anterior neural type in self-organizing culture. A low concentration of the caudalizing factor insulin and a MAPK/ERK kinase inhibitor enhanced the expression of the caudal forebrain markers Otx2 and Pax6. BMP7 promoted an increase in thalamic precursors such as Tcf7l2+/Gbx2+ and Tcf7l2+/Olig3+ cells. mESC thalamic precursors began to express the glutamate transporter vGlut2 and the axon-specific marker VGF, similar to mature projection neurons. The mESC thalamic neurons extended their axons to cortical layers in both organotypic culture and subcortical transplantation. Thus, we have identified the minimum elements sufficient for in vitro generation of thalamic neurons. These findings expand our knowledge of thalamic development.