Determination of cell fate in multicellular organism is mediated by dynamic communication with their neighboring cells. Especially, the reciprocal communication between neurons and glial cells is essential for the proper development of nervous tissues. The ventral anterior homeobox 1 (Vax1) transcription factor has been known to control the development of ventral forebrain structures not only by facilitating glial fate of ventral optic neuroepithelium through transcriptional regulation of target genes autonomously, but also by regulating the axonal growth and migration of neurons in a non-autonomous manner. I found that Vax1 protein can be secreted out into extracellular space and then moved into the neighboring cells in vitro and in vivo. Intercellular transfer of Vax1 protein is mediated by trafficking of sphingomyelin-derived cholesterol-rich vesicles. Therefore, the intercellular trafficking of Vax1 is altered in mice lacking acidic sphingomyelinase (ASM) which decreases the vesicular concentration of sphingomyelin. I also discovered a novel extracellular function of Vax1 as growth factor for retinal ganglion cell (RGC) axon. Vax1 directly binds and promotes RGC axonal growth independent of its transcription factor activity. I found that Vax1-induced RGC axonal growth is mediated by heparan sulfate proteoglycans (HSPGs) including Syndecan and Glypican. Together, I propose a novel function of Vax1 that is secreted from glial precursor cells in the ventral and anterior parts of brain and binds to axons that cross midline of the brain. The results therefore explain the multiple defects on the development of midline structures of brain in human and mouse that lack VAX1 gene.