The significance of API-first design in development lies in its approach to creating software applications where the Application Programming Interface (API) is prioritized during the development process. By designing the API first, developers ensure that it is robust, well-documented, and tailored for future integration needs. This methodology fosters better collaboration between frontend and backend development teams, enhances innovation potential, and simplifies the integration of third-party services. An API-first approach ultimately promotes scalability and agility in development, allowing for quicker updates and improvements.