The expression of specialized signal transduction components in mammalian olfactory neurons is thought to be regulated by the O/E (Olf-1/EBF) family of transcription factors. The O/E proteins are expressed in cells of the olfactory neuronal lineage throughout development and are also expressed transiently in neurons in the developing nervous system during embryogenesis. We have identified a C. elegans homologue of the mammalian O/E proteins, which displays greater than 80% similarity over 350 amino acids. Like its mammalian homologues, CeO/E is expressed in certain chemosensory neurons (ASI amphid neurons) throughout development and is also expressed transiently in developing motor neurons when these cells undergo axonal outgrowth. We demonstrate that CeO/E is the product of the unc-3 gene, mutations in which cause defects in the axonal outgrowth of motor neurons, as well as defects in dauer formation, a process requiring chemosensory inputs. These observations suggest that the O/E family of transcription factors play a central and evolutionarily conserved role in the expression of proteins essential for axonal pathfinding and/or neuronal differentiation in both sensory and motor neurons.