The actin-binding protein Shroom is essential for neural tube morphogenesis in multiple vertebrate organisms, indicating its function is evolutionarily conserved. Shroom facilitates neurulation by regulating the morphology of neurepithelial cells. Shroom localizes to the apical tip of adherens junctions of neural ectoderm cells in vivo and to the apical junctional complex (AJC) in MDCK cells. Induced expression of Shroom in polarized epithelia elicits apical constriction and dramatic reorganization of the apical arrangement and packing of cells without altering apical-basal polarity. These events likely mimic the cell shape changes and cellular movements required for neurulation in vivo. The observed phenotypes depend on the ability of Shroom to alter F-actin distribution and regulate the formation of a previously uncharacterized contractile actomyosin network associated with the AJC. Targeting the C-terminal domain of Shroom to the apical plasma membrane elicits constriction and reorganization of the actomyosin network, indicting that this domain mediates Shroom's activity. In vivo, Shroom-mutant neural epithelia show a marked reduction in apically positioned myosin. Thus, Shroom likely facilitates neural tube closure by regulating cell shape changes via the apical positioning of an actomyosin network in the neurepithelium.