The muscleblind family of mRNA splicing regulators is conserved across species and regulates the development of muscles and the nervous system. However, how Muscleblind proteins regulate neuronal fate specification and neurite morphogenesis at the single-neuron level is not well understood. In this study, we found that the C. elegans Muscleblind/MBL-1 promotes axonal growth in the touch receptor neurons (TRNs) by regulating microtubule stability and polarity. Transcriptomic analysis identified dozens of MBL-1-controlled splicing events in genes related to neuronal differentiation or microtubule functions. Among the MBL-1 targets, the LIM-domain transcription factor mec-3 is the terminal selector for the TRN fate and induces the expression of many TRN terminal differentiation genes. MBL-1 promotes the splicing of the mec-3 long isoform, which is essential for TRN fate specification, and inhibits the short isoforms that have much weaker activities in activating downstream genes. MBL-1 promotes mec-3 splicing through three "YGCU(U/G)Y" motifs located in or downstream of the included exon, which is similar to the mechanisms used by mammalian Muscleblind and suggests a deeply conserved context-dependency of the splicing regulation. Interestingly, the expression of mbl-1 in the TRNs is dependent on the mec-3 long isoform, indicating a positive feedback loop between the splicing regulator and the terminal selector. Finally, through a forward genetic screen, we found that MBL-1 promotes neurite growth partly by inhibiting the DLK-1/p38 MAPK pathway. In summary, our study provides mechanistic understanding of the role of Muscleblind in regulating cell fate specification and neuronal morphogenesis.