Fetal hydrocephalus (FH), characterized by the accumulation of cerebrospinal fluid, an enlarged head, and neurological dysfunction, is one of the most common neurological disorders of newborns. Although the etiology of FH remains unclear, it is associated with intracranial hemorrhage. Here, we report that lysophosphatidic acid (LPA), a blood-borne lipid that activates signaling through heterotrimeric guanosine 5'-triphosphate-binding protein (G protein)-coupled receptors, provides a molecular explanation for FH associated with hemorrhage. A mouse model of intracranial hemorrhage in which the brains of mouse embryos were exposed to blood or LPA resulted in development of FH. FH development was dependent on the expression of the LPA(1) receptor by neural progenitor cells. Administration of an LPA(1) receptor antagonist blocked development of FH. These findings implicate the LPA signaling pathway in the etiology of FH and suggest new potential targets for developing new treatments for FH.