MYCBP2 is a ubiquitin (Ub) E3 ligase (E3) that is essential for neurodevelopment and regulates axon maintenance. MYCBP2 transfers Ub to nonlysine substrates via a newly discovered RING-Cys-Relay (RCR) mechanism, where Ub is relayed from an upstream cysteine to a downstream substrate esterification site. The molecular bases for E2-E3 Ub transfer and Ub relay are unknown. Whether these activities are linked to the neural phenotypes is also unclear. We describe the crystal structure of a covalently trapped E2~Ub:MYCBP2 transfer intermediate revealing key structural rearrangements upon E2-E3 Ub transfer and Ub relay. Our data suggest that transfer to the dynamic upstream cysteine, whilst mitigating lysine activity, requires a closed-like E2~Ub conjugate with tempered reactivity, and Ub relay is facilitated by a helix-coil transition. Furthermore, neurodevelopmental defects and delayed injury-induced degeneration in RCR-defective knock-in mice suggest its requirement, and that of substrate esterification activity, for normal neural development and programmed axon degeneration.