The six-transmembrane protein GDE2 controls the onset and progression of spinal motor neuron differentiation through extracellular glycerophosphodiester phosphodiesterase metabolism. Although this process is likely to be tightly regulated, the relevant mechanisms that modulate its activity are unknown. Here we show that the antioxidant scavenger peroxiredoxin1 (Prdx1) interacts with GDE2, and that loss of Prdx1 causes motor neuron deficits analogous to GDE2 ablation. Prdx1 cooperates with GDE2 to drive motor neuron differentiation, and this synergy requires Prdx1 thiol-dependent catalysis. Prdx1 activates GDE2 through reduction of an intramolecular disulfide bond that bridges its intracellular N- and C-terminal domains. GDE2 variants incapable of disulfide bond formation acquire independence from Prdx1 and are potent inducers of motor neuron differentiation. These findings define Prdx1 as a pivotal regulator of GDE2 activity and suggest roles for coupled thiol-redox-dependent cascades in controlling neuronal differentiation in the spinal cord.