The small size and defined connectivity of the C. elegans nervous system and the amenability of this species to systematic functional screens have continued to yield new insights into neuronal differentiation. Many aspects of C. elegans neuronal development resemble those of other more complex neurons. The basic cellular machinery of synaptic transmission is highly conserved. Recent work has begun to unveil the roles of proteoglycans in axon guidance and branching, and of the extracellular matrix in neuronal process maintenance. The importance of ubiquitin-mediated protein turnover in neuronal differentiation is revealed by the identification of new and conserved pathways that promote the organization and function of the synapse.