Heparan sulfate (HS) plays an essential role in extracellular signaling during development. Biochemical studies have established that HS binding to ligands and receptors is regulated by the fine 6-O-sulfated structure of HS; however, mechanisms that control sulfated HS structure and associated signaling functions in vivo are not known. Extracellular HS 6-O-endosulfatases, SULF1 and SULF2, are candidate enzymatic regulators of HS 6-O-sulfated structure and modulate HS-dependent signaling. To investigate Sulf regulation of developmental signaling, we have disrupted Sulf genes in mouse and identified redundant functions of Sulfs in GDNF-dependent neural innervation and enteric glial formation in the esophagus, resulting in esophageal contractile malfunction in Sulf1(-/-);Sulf2(-/-) mice. SULF1 is expressed in GDNF-expressing esophageal muscle and SULF2 in innervating neurons, establishing their direct functions in esophageal innervation. Biochemical and cell signaling studies show that Sulfs are the major regulators of HS 6-O-desulfation, acting to reduce GDNF binding to HS and to enhance GDNF signaling and neurite sprouting in the embryonic esophagus. The functional specificity of Sulfs in GDNF signaling during esophageal innervation was established by showing that the neurite sprouting is selectively dependent on GDNF, but not on neurotrophins or other signaling ligands. These findings provide the first in vivo evidence that Sulfs are essential developmental regulators of cellular HS 6-O-sulfation for matrix transmission and reception of GDNF signal from muscle to innervating neurons.