The diencephalon, together with the telencephalon, develops out of the prosencephalon. In contrast to the brainstem, here there is a massive spreading of the alar plates at the expense of the basal plates.
From the 5th week (stage 14) two lateral cavities, the cerebral vesicles (future hemispheres), develop in the region of the prosencephalon. The diencephalon, on the other hand, arises out of the caudal portion of the prosencephalon. The diencephalon remains unpaired and represents the transition region between the telencephalon and the mesencephalon. The cavities of the telencephalon are connected with those of the diencephalon via the interventricular foramina (foramina Monroi). Through their massive increase in size, up to the end of the embryonic period, the hemisphere vesicles substantially surround the diencephalon. In this stage, there is a adhesion of the hemisphere vesicles with the diencephalon so that they form an anatomical unit.
Rostrally, the diencephalon ends at the level of a transverse plane through the optic chiasm and the interventricular foramina (lamina terminalis) while, caudally, it extends past the epiphysis and the mammilla bodies.
The side walls of the diencephalon experience a very special transformation in which the roof, aral and floor plates are involved. As was already said, the basal plates are largely unaffected by this since, at the same time, they end with the sulcus limitans at the transition to the IIIrd ventricle (according to some authors these structures should nevertheless extend further rostrally). From the junction of the mesencephalic aqueduct to the interventricular foramen, though, a hypothalamic sulcus appears on both sides in the side walls of the diencephalon.