Generally, the second messenger bis-(3'-5')-cyclic dimeric GMP (c-di-GMP) regulates the switch between motile and sessile lifestyles in bacteria. Here, we show that c-di-GMP is an essential regulator of multicellular development in the social bacterium Myxococcus xanthus. In response to starvation, M. xanthus initiates a developmental program that culminates in formation of spore-filled fruiting bodies. We show that c-di-GMP accumulates at elevated levels during development and that this increase is essential for completion of development whereas excess c-di-GMP does not interfere with development. MXAN3735 (renamed DmxB) is identified as a diguanylate cyclase that only functions during development and is responsible for this increased c-di-GMP accumulation. DmxB synthesis is induced in response to starvation, thereby restricting DmxB activity to development. DmxB is essential for development and functions downstream of the Dif chemosensory system to stimulate exopolysaccharide accumulation by inducing transcription of a subset of the genes encoding proteins involved in exopolysaccharide synthesis. The developmental defects in the dmxB mutant are non-cell autonomous and rescued by co-development with a strain proficient in exopolysaccharide synthesis, suggesting reduced exopolysaccharide accumulation as the causative defect in this mutant. The NtrC-like transcriptional regulator EpsI/Nla24, which is required for exopolysaccharide accumulation, is identified as a c-di-GMP receptor, and thus a putative target for DmxB generated c-di-GMP. Because DmxB can be-at least partially-functionally replaced by a heterologous diguanylate cyclase, these results altogether suggest a model in which a minimum threshold level of c-di-GMP is essential for the successful completion of multicellular development in M. xanthus.