The subcommissural organ (SCO) is a gland located at the entrance of the aqueduct of Sylvius in the brain. It exists in species as distantly related as amphioxus and humans, but its function is largely unknown. To explore its function, we compared transcriptomes of SCO and non-SCO brain regions and found three genes, Sspo, Car3, and Spdef, that are highly expressed in the SCO. Mouse strains expressing Cre recombinase from endogenous promoter/enhancer elements of these genes were used to genetically ablate SCO cells during embryonic development, resulting in severe hydrocephalus and defects in neuronal migration and development of neuronal axons and dendrites. Unbiased peptidomic analysis revealed enrichment of three SCO-derived peptides, namely thymosin beta 4, thymosin beta 10, and NP24, and their reintroduction into SCO-ablated brain ventricles substantially rescued developmental defects. Together, these data identify a critical role for the SCO in brain development.