The mechanisms and treatment of psychomotor retardation, which includes motor and cognitive impairment, are indefinite. The Allan-Herndon-Dudley syndrome (AHDS) is an X-linked psychomotor retardation characterized by delayed development, severe intellectual disability, muscle hypotonia, and spastic paraplegia, in combination with disturbed thyroid hormone (TH) parameters. AHDS has been associated with mutations in the monocarboxylate transporter 8 (mct8/slc16a2) gene, which is a TH transporter. In order to determine the pathophysiological mechanisms of AHDS, MCT8 knockout mice were intensively studied. Although these mice faithfully replicated the abnormal serum TH levels, they failed to exhibit the neurological and behavioral symptoms of AHDS patients. Here, we generated an mct8 mutant (mct8-/-) zebrafish using zinc-finger nuclease (ZFN)-mediated targeted gene editing system. The elimination of MCT8 decreased the expression levels of TH receptors; however, it did not affect the expression of other TH-related genes. Similar to human patients, mct8-/- larvae exhibited neurological and behavioral deficiencies. High-throughput behavioral assays demonstrated that mct8-/- larvae exhibited reduced locomotor activity, altered response to external light and dark transitions and an increase in sleep time. These deficiencies in behavioral performance were associated with altered expression of myelin-related genes and neuron-specific deficiencies in circuit formation. Time-lapse imaging of single-axon arbors and synapses in live mct8-/- larvae revealed a reduction in filopodia dynamics and axon branching in sensory neurons and decreased synaptic density in motor neurons. These phenotypes enable assessment of the therapeutic potential of three TH analogs that can enter the cells in the absence of MCT8. The TH analogs restored the myelin and axon outgrowth deficiencies in mct8-/- larvae. These findings suggest a mechanism by which MCT8 regulates neural circuit assembly, ultimately mediating sensory and motor control of behavioral performance. We also propose that the administration of TH analogs early during embryo development can specifically reduce neurological damage in AHDS patients.