Glial‐derived neurotrophic factor (Gdnf) is required for morphogenesis of the enteric nervous system (ENS) and it has been shown to regulate proliferation, differentiation, and survival of cultured enteric neural crest–derived cells (ENCCs). The goal of this study was to investigate its in vivo role in the colon, the site most commonly affected by intestinal neuropathies such as Hirschsprung's disease. Gdnf activity was modulated in ovo in the distal gut of avian embryos using targeted retrovirus‐mediated gene overexpression and retroviral vector‐based gene silencing. We find that Gdnf has a pleiotropic effect on colonic ENCCs, promoting proliferation, inducing neuronal differentiation, and acting as a chemoattractant. Down‐regulating Gdnf similarly induces premature neuronal differentiation, but also inhibits ENCC proliferation, leading to distal colorectal aganglionosis with severe proximal hypoganglionosis. These results indicate an important role for Gdnf signaling in colonic ENS formation and emphasize the critical balance between proliferation and differentiation in the developing ENS. Developmental Dynamics 240:1402–1411, 2011. © 2011 Wiley‐Liss, Inc.