Target innervation by specific neuronal populations involves still incompletely understood interactions between central and peripheral factors. We show that glial cell line-derived neurotrophic factor (GDNF), initially characterized for its role as a survival factor, is present early in the plexus of the developing forelimb and later in two muscles: the cutaneus maximus and latissimus dorsi. In the absence of GDNF signaling, motor neurons that normally innervate these muscles are mispositioned within the spinal cord and muscle invasion by their axons is dramatically reduced. The ETS transcription factor PEA3 is normally expressed by these motor neurons and fails to be induced in most of them in GDNF signaling mutants. Thus, GDNF acts as a peripheral signal to induce PEA3 expression in specific motor neuron pools thereby regulating both cell body position and muscle innervation.