The significance of API testing in software development lies in ensuring the functionality, reliability, and security of APIs (Application Programming Interfaces). APIs serve as the backbone for communication between different software applications, enabling them to exchange data and interact with each other. Effective API testing verifies that endpoints respond as expected under various conditions, identify any defects or vulnerabilities, and help ensure compatibility with different platforms. Comprehensive testing contributes to improved performance and user satisfaction, ultimately leading to more resilient software systems.