The small Rho-family GTPase Cdc42 has long been known to have a role in cell motility and axon growth. The eukaryotic Ccd42 gene is alternatively spliced to generate mRNAs with two different 3′ untranslated regions (UTRs) that encode proteins with distinct C-termini. The C-termini of these Cdc42 proteins include CaaX and CCaX motifs for post-translational prenylation and palmitoylation, respectively. Palmitoyl-Cdc42 protein was previously shown to contribute to dendrite maturation, while the prenyl-Cdc42 protein contributes to axon specification and its mRNA was detected in neurites. Here, we show that the mRNA encoding prenyl-Cdc42 isoform preferentially localizes into PNS axons and this localization selectively increases in vivo during peripheral nervous system (PNS) axon regeneration. Functional studies indicate that prenyl-Cdc42 increases axon length in a manner that requires axonal targeting of its mRNA, which, in turn, needs an intact C-terminal CaaX motif that can drive prenylation of the encoded protein. In contrast, palmitoyl-Cdc42 has no effect on axon growth but selectively increases dendrite length. Together, these data show that alternative splicing of the Cdc42 gene product generates an axon growth promoting, locally synthesized prenyl-Cdc42 protein.