Neuropil is a fundamental form of tissue organization within the brain(1), in which densely packed neurons synaptically interconnect into precise circuit architecture(2,3). However, the structural and developmental principles that govern this nanoscale precision remain largely unknown(4,5). Here we use an iterative data coarse-graining algorithm termed 'diffusion condensation'(6) to identify nested circuit structures within the Caenorhabditis elegans neuropil, which is known as the nerve ring. We show that the nerve ring neuropil is largely organized into four strata that are composed of related behavioural circuits. The stratified architecture of the neuropil is a geometrical representation of the functional segregation of sensory information and motor outputs, with specific sensory organs and muscle quadrants mapping onto particular neuropil strata. We identify groups of neurons with unique morphologies that integrate information across strata and that create neural structures that cage the strata within the nerve ring. We use high resolution light-sheet microscopy(7,8) coupled with lineage-tracing and cell-tracking algorithms(9,10) to resolve the developmental sequence and reveal principles of cell position, migration and outgrowth that guide stratified neuropil organization. Our results uncover conserved structural design principles that underlie the architecture and function of the nerve ring neuropil, and reveal a temporal progression of outgrowth-based on pioneer neurons-that guides the hierarchical development of the layered neuropil. Our findings provide a systematic blueprint for using structural and developmental approaches to understand neuropil organization within the brain.