The characteristic six layers of the mammalian neocortex develop sequentially as neurons are generated by neural progenitors and subsequently migrate past older neurons to their final position in the cortical plate. One of the earliest steps of neuronal differentiation is the formation of an axon. Small GTPases play essential roles during this process by regulating cytoskeletal dynamics and intracellular trafficking. While the function of GTPases has been studied extensively in cultured neurons and in vivo much less is known about their upstream regulators. Here we show that Arhgef7 (also called βPix or Cool1) is essential for axon formation during cortical development. The loss of Arhgef7 results in an extensive loss of axons in cultured neurons and in the developing cortex. Arhgef7 is a guanine-nucleotide exchange factor (GEF) for Cdc42, a GTPase that has a central role in directing the formation of axons during brain development. However, active Cdc42 was not able to rescue the knockdown of Arhgef7. We show that Arhgef7 interacts with the GTPase TC10 that is closely related to Cdc42. Expression of active TC10 can restore the ability to extend axons in Arhgef7-deficient neurons. Our results identify an essential role of Arhgef7 during neuronal development that promotes axon formation upstream of TC10.