The mechanism of inorganic arsenic-induced neurotoxicity at the cellular level is not known. In zebrafish, teratological effects of inorganic arsenic have been shown at various concentrations. Here, we used similar concentrations of inorganic arsenic to evaluate the effects on specific neuron types. Exposure of zebrafish embryos at 5 h post fertilization (hpf) to sodium arsenite induced developmental toxicity (reduced body length) in 72 hpf larvae, beginning at a concentration of 300 mg/L concentration. Mortality or overt morphological deformity was detected at 500 mg/L sodium arsenite. While 200 mg/L sodium arsenite induced development of tyrosine hydroxylase-positive (dopaminergic) neurons, there was no significant effect on the development of 5-hydroxytryptamine (serotonergic) neurons. Sodium arsenite reduced acetylcholinesterase activity. In the hb9-GFP transgenic larvae, both 200 and 400 mg/L sodium arsenite produced supernumerary motor neurons in the spinal cord. Inhibition of the Sonic hedgehog (Shh) pathway that is essential for motor neuron development, by Gant61, prevented sodium arsenite-induced supernumerary motor neuron development. Inductively coupled plasma mass spectrometry (ICP-MS) revealed that with 200 mg/L and 400 mg/L sodium arsenite treatment, each larva had an average of 387.8 pg and 847.5 pg arsenic, respectively. The data show for the first time that inorganic arsenic alters the development of dopaminergic and motor neurons in the zebrafish larvae and the latter occurs through the Shh pathway. These results may help understand why arsenic-exposed populations suffer from psychiatric disorders and motor neuron disease and Shh may, potentially, serve as a plasma biomarker of arsenic toxicity.