During nervous system development, Sonic hedgehog (Shh) guides developing commissural axons toward the floor plate of the spinal cord. To guide axons, Shh binds to its receptor Boc and activates downstream effectors such as Smoothened (Smo) and Src family kinases (SFKs). SFK activation requires Smo activity and is also required for Shh-mediated axon guidance. Here we report that β-arrestin1 and β-arrestin2 (β-arrestins) serve as scaffolding proteins that link Smo and SFKs in Shh-mediated axon guidance. We found that β-arrestins are expressed in rat commissural neurons. We also found that Smo, β-arrestins, and SFKs form a tripartite complex, with the complex formation dependent on β-arrestins. β-arrestin knockdown blocked the Shh-mediated increase in Src phosphorylation, demonstrating that β-arrestins are required to activate Src kinase downstream of Shh. β-arrestin knockdown also led to the loss of Shh-mediated attraction of rat commissural axons in axon turning assays. Expression of two different dominant-negative β-arrestins, β-arrestin1 V53D which blocks the internalization of Smo and β-arrestin1 P91G-P121E which blocks its interaction with SFKs, also led to the loss of Shh-mediated attraction of commissural axons. In vivo, the expression of these dominant-negative β-arrestins caused defects in commissural axon guidance in the spinal cord of chick embryos of mixed sexes. Thus we show that β-arrestins are essential scaffolding proteins that connect Smo to SFKs and are required for Shh-mediated axon guidance.