In the developing forebrain, neuronal polarization is a stepwise and initially reversible process that underlies correct migration and axon specification. Many aspects of cytoskeletal changes that accompany polarization are currently molecularly undefined and thus poorly understood. Here we reveal that the p21-activated kinase (Pak1) is essential for the specification of an axon and dendrites. In hippocampal neurons, activation of Pak1 is spatially restricted to the immature axon despite its uniform presence in all neurites. Hyperactivation of Pak1 at the membrane of all neurites or loss of Pak1 expression disrupts both neuronal morphology and the distinction between an axon and dendrites. We reveal that Pak1 acts on polarity in a kinase-dependent manner, by affecting the F-actin and microtubule cytoskeleton at least in part through Rac1 and cofilin. Our data are the first to demonstrate the importance of localized Pak1 kinase activation for neuronal polarization and differentiation.