Motor neuron (MN) development and nerve regeneration requires orchestrated action of a vast number of molecules. Here, we identify SorCS2 as a progranulin (PGRN) receptor that is required for MN diversification and axon outgrowth in zebrafish and mice. In zebrafish, SorCS2 knockdown also affects neuromuscular junction morphology and fish motility. In mice, SorCS2 and PGRN are co-expressed by newborn MNs from embryonic day 9.5 until adulthood. Using cell-fate tracing and nerve segmentation, we find that SorCS2 deficiency perturbs cell-fate decisions of brachial MNs accompanied by innervation deficits of posterior nerves. Additionally, adult SorCS2 knockout mice display slower motor nerve regeneration. Interestingly, primitive macrophages express high levels of PGRN, and their interaction with SorCS2-positive motor axon is required during axon pathfinding. We further show that SorCS2 binds PGRN to control its secretion, signaling, and conversion into granulins. We propose that PGRN-SorCS2 signaling controls MN development and regeneration in vertebrates.