The refinement of neural circuits during development depends upon a dynamic process of branching of axons and dendrites that leads to synapse formation and connectivity. The neurotrophin BDNF plays an essential role in the outgrowth and activity-dependent remodeling of axonal arbors in vivo. However, the mechanisms that translate extracellular signals into axonal branch formation are incompletely understood. Here we report that the MAP kinase phosphatase-1 (MKP-1) controls axon branching. MKP-1 expression induced by BDNF signaling exerts spatio-temporal deactivation of JNK, which negatively regulates the phosphorylation of JNK substrates that impinge upon microtubule destabilization. Indeed, neurons from mkp-1 null mice were unable to produce axon branches in response to BDNF. Our results indicate a heretofore-unknown signaling mechanism to regulate axonal branching and provide a framework for studying the molecular mechanism of innervation and axonal remodeling under normal and pathological conditions.