Neuronal circuits are shaped during development by the coordinated action of guidance factors and signals that regulate axonal branching. Unlike guidance cues, the molecules and signaling cascades that underlie axonal branching remain to be resolved. Here we show that the secreted molecule C-type natriuretic peptide (CNP) induces a cGMP signaling cascade via its receptor particulate guanylyl cyclase Npr2 which is essential for sensory axon bifurcation at the dorsal root entry zone (DREZ) of the spinal cord. In contrast, another form of sensory axon branching-collateral formation-is not affected by this pathway. We also demonstrate that cGMP signaling via the nitric oxide-stimulated soluble guanylyl cyclase system (NO-GC) is dispensable for sensory axon branching. Functionally, the bifurcation error in CNP mutant mice is maintained at mature stages and results in a reduced input on secondary neurons as detected by patch-clamp recordings.