How can I dynamically create derived classes from a base class

type() is the function that creates classes and in particular sub-classes, like in the question:

def set_x(self, value):
    self.x = value

# type() takes as argument the new class name, its base
# classes, and its attributes:
SubClass = type('SubClass', (BaseClass,), {'set_x': set_x})
# (More methods can be put in SubClass, including __init__().)

obj = SubClass()
obj.set_x(42)
print obj.x  # Prints 42
print isinstance(obj, BaseClass)  # True

This bit of code allows you to create new classes with dynamic names and parameter names. The parameter verification in __init__ just does not allow unknown parameters, if you need other verifications, like type, or that they are mandatory, just add the logic there:

class BaseClass(object):
    def __init__(self, classtype):
        self._type = classtype

def ClassFactory(name, argnames, BaseClass=BaseClass):
    def __init__(self, **kwargs):
        for key, value in kwargs.items():
            # here, the argnames variable is the one passed to the
            # ClassFactory call
            if key not in argnames:
                raise TypeError("Argument %s not valid for %s" 
                    % (key, self.__class__.__name__))
            setattr(self, key, value)
        BaseClass.__init__(self, name[:-len("Class")])
    newclass = type(name, (BaseClass,),{"__init__": __init__})
    return newclass

And this works like this, for example:

>>> SpecialClass = ClassFactory("SpecialClass", "a b c".split())
>>> s = SpecialClass(a=2)
>>> s.a
2
>>> s2 = SpecialClass(d=3)
Traceback (most recent call last):
  File "<stdin>", line 1, in <module>
  File "<stdin>", line 8, in __init__
TypeError: Argument d not valid for SpecialClass

I see you are asking for inserting the dynamic names in the naming scope -- now, that is not considered a good practice in Python - you either have variable names, known at coding time, or data - and names learned in runtime are more "data" than "variables" -

So, you could just add your classes to a dictionary and use them from there:

name = "SpecialClass"
classes = {}
classes[name] = ClassFactory(name, params)
instance = classes[name](...)

And if your design absolutely needs the names to come in scope, just do the same, but use the dictionary returned by the globals() call instead of an arbitrary dictionary:

name = "SpecialClass"
globals()[name] = ClassFactory(name, params)
instance = SpecialClass(...)

(It indeed would be possible for the class factory function to insert the name dynamically on the global scope of the caller - but that is even worse practice, and is not compatible across Python implementations. The way to do that would be to get the caller's execution frame, through sys._getframe(1) and setting the class name in the frame's global dictionary in its f_globals attribute).

update, tl;dr: This answer had become popular, still its very specific to the question body. The general answer on how to "dynamically create derived classes from a base class" in Python is a simple call to type passing the new class name, a tuple with the baseclass(es) and the __dict__ body for the new class -like this:

>>> new_class = type("NewClassName", (BaseClass,), {"new_method": lambda self: ...})

update
Anyone needing this should also check the dill project - it claims to be able to pickle and unpickle classes just like pickle does to ordinary objects, and had lived to it in some of my tests.