Cyclic GMP has been proposed to regulate axonal development, but the molecular and cellular mechanisms underlying the formation of axon branches are not well understood. Here, we report the use of rodent embryonic sensory neurons from the dorsal root ganglion (DRG) to demonstrate the role of cGMP signaling in axon branching and to identify the downstream molecular pathway mediating this novel regulation. Pharmacologically, a specific cGMP analog promotes DRG axon branching in culture, and this activity can be achieved by activating the endogenous soluble guanylyl cyclase that produces cGMP. At the molecular level, the cGMP-dependent protein kinase 1 (PrkG1) mediates this activity, as DRG neurons isolated from the kinase-deficient mouse fail to respond to cGMP activation to make branches, whereas overexpression of a PrkG1 mutant with a higher-than-normal basal kinase activity is sufficient to induce branching. In addition, cGMP activation in DRG neurons leads to phosphorylation of glycogen synthase kinase 3 (GSK3), a protein that normally suppresses branching. This interaction is direct, because PrkG1 binds GSK3 in heterologous cells and the purified kinase can phosphorylate GSK3 in vitro. More importantly, overexpression of a dominant active form of GSK3 suppresses cGMP-dependent branching in DRG neurons. Thus, our study establishes an intrinsic signaling cascade that links cGMP activation to GSK3 inhibition in controlling axon branching during sensory axon development.