Atypical protein kinase C (aPKC) isoforms ζ and λ interact with polarity complex protein Par3 and are evolutionarily conserved regulators of cell polarity. Prkcz encodes aPKC-ζ and PKM-ζ, a truncated, neuron-specific alternative transcript, and Prkcl encodes aPKC-λ. Here we show that, in embryonic hippocampal neurons, two aPKC isoforms, aPKC-λ and PKM-ζ, are expressed. The localization of these isoforms is spatially distinct in a polarized neuron. aPKC-λ, as well as Par3, localizes at the presumptive axon, whereas PKM-ζ and Par3 are distributed at non-axon-forming neurites. PKM-ζ competes with aPKC-λ for binding to Par3 and disrupts the aPKC-λ–Par3 complex. Silencing of PKM-ζ or overexpression of aPKC-λ in hippocampal neurons alters neuronal polarity, resulting in neurons with supernumerary axons. In contrast, the overexpression of PKM-ζ prevents axon specification. Our studies suggest a molecular model wherein mutually antagonistic intermolecular competition between aPKC isoforms directs the establishment of neuronal polarity.