In the dorsal spinal cord, distinct interneuron classes relay specific somatosensory information, such as touch, heat, and pain, from the periphery to higher brain centers via ipsilateral and contralateral axonal pathways. The transcriptional mechanisms by which dorsal interneurons choose between ipsilateral and contralateral projection fates are unknown. Here, we show that a single transcription factor (TF), BARHL2, regulates this choice in proprioceptive dI1 interneurons by selectively suppressing cardinal dI1contra features in dI1ipsi neurons, despite expression by both subtypes. Strikingly, dI1ipsi neurons in Barhl2-null mice exhibit a dI1contra cell settling pattern in the medial deep dorsal horn, and, most importantly, they project axons contralaterally. These aberrations are preceded by ectopic dI1ipsi expression of the defining dI1contra TF, LHX2, and down-regulation of the dI1ipsi-enriched TF, BARHL1. Taken together, these results elucidate BARHL2 as a critical postmitotic regulator of dI1 subtype diversification, as well as its intermediate position in the dI1 genetic hierarchy.