The Bj1 gene encodes the Drosophila homolog of RCC1, the guanine-nucleotide exchange factor for RanGTPase. Here, we provide the first phenotypic characterization of a RCC1 homolog in a developmental model system. We identified Bj1 (dRCC1) in a genetic screen to identify mutations that alter central nervous system development. We find that zygotic dRCC1 mutant embryos exhibit specific defects in the development and differentiation of lateral CNS neurons although cell division and the cell cycle appear grossly normal. dRCC1 mutant nerve cords contain abnormally large cells with compartmentalized nuclei and exhibit increased transcription in the lateral CNS. As RCC1 is an important component of the nucleocytoplasmic transport machinery, we find that dRCC1 function is required for nuclear import of nuclear localization signal sequence (NLS)-carrying cargo molecules. Finally, we show that dRCC1 is required for cell proliferation and/or survival during germline, eye and wing development and that dRCC1 appears to facilitate apoptosis.