The arginylation branch of the N-end rule pathway is a ubiquitin-mediated proteolytic system in which enzymatic conjugation of Arg by ATE1-encoded Arg-tRNA-protein transferase to N-terminal Asp, Glu, or oxidized Cys residues generates essential degradation signals. Here, we characterized the ATE1-/- mice and identified the essential role of N-terminal arginylation in neural tube development. ATE1-null mice showed severe intracerebral hemorrhages and cystic space near the neural tubes. Expression of ATE1 was prominent in the developing brain and spinal cord, and this pattern overlapped with the migration path of neural stem cells. The ATE1-/- brain showed defective G-protein signaling. Finally, we observed reduced mitosis in ATE1-/- neuroepithelium and a significantly higher nitric oxide concentration in the ATE1-/- brain. Our results strongly suggest that the crucial role of ATE1 in neural tube development is directly related to proper turn-over of the RGS4 protein, which participate in the oxygen-sensing mechanism in the cells.