Nedd4 (neural precursor cell expressed developmentally down-regulated gene 4) is an E3 ubiquitin ligase highly conserved from yeast to humans. The expression of Nedd4 is developmentally down-regulated in the mammalian nervous system, but the role of Nedd4 in mammalian neural development remains poorly understood. Here we show that a null mutation of Nedd4 in mice leads to perinatal lethality: mutant mice were stillborn and many of them died in utero before birth (between E15.5-E18.5). In Nedd4 mutant embryos, skeletal muscle fiber sizes and motoneuron numbers are significantly reduced. Surviving motoneurons project axons to their target muscles on schedule, but motor nerves defasciculate upon reaching the muscle surface, suggesting that Nedd4 plays a critical role in fine-tuning the interaction between the nerve and the muscle. Electrophysiological analyses of the neuromuscular junction (NMJ) demonstrate an increased spontaneous miniature endplate potential (mEPP) frequency in Nedd4 mutants. However, the mutant neuromuscular synapses are less responsive to membrane depolarization, compared to the wildtypes. Ultrastructural analyses further reveal that the pre-synaptic nerve terminal branches at the NMJs of Nedd4 mutants are increased in number, but decreased in diameter compared to the wildtypes. These ultrastructural changes are consistent with functional alternation of the NMJs in Nedd4 mutants. Unexpectedly, Nedd4 is not expressed in motoneurons, but is highly expressed in skeletal muscles and Schwann cells. Together, these results demonstrate that Nedd4 is involved in regulating the formation and function of the NMJs through non-cell autonomous mechanisms.