Diphthamide is a modified histidine residue unique for eukaryotic translation elongation factor 2 (eEF2), a key ribosomal protein. Loss of this evolutionarily conserved modification causes developmental defects through unknown mechanisms. In a patient with compound heterozygous mutations in Diphthamide Biosynthesis 1 (DPH1) and impaired eEF2 diphthamide modification, we observe multiple defects in neural crest (NC)-derived tissues. Knockin mice harboring the patient's mutations and Xenopus embryos with Dph1 depleted also display NC defects, which can be attributed to reduced proliferation in the neuroepithelium. DPH1 depletion facilitates dissociation of eEF2 from ribosomes and association with p53 to promote transcription of the cell cycle inhibitor p21, resulting in inhibited proliferation. Knockout of one p21 allele rescues the NC phenotypes in the knockin mice carrying the patient's mutations. These findings uncover an unexpected role for eEF2 as a transcriptional coactivator for p53 to induce p21 expression and NC defects, which is regulated by diphthamide modification.