Serotonin is a classical small-molecule neurotransmitter with known effects on developmental processes. Previous studies have shown a developmental role for serotonin in the fly peripheral nervous system. In this study, we show that serotonin can modulate the development of serotonergic varicosities within the fly central nervous system. We have developed a system to examine the development of serotonergic varicosities in the larval CNS. We use this method to describe the normal serotonergic development in the A7 abdominal ganglion. From first to third instar larvae, the volume of the neuropil and number of serotonergic varicosities increase substantially while the varicosity density remains relatively constant. We hypothesize that serotonin is an autoregulator for serotonergic varicosity density. We tested the sensitivity of serotonergic varicosities to serotonin by adding neurotransmitter at various stages to isolated larval ventral nerve cords. Addition of excess exogenous serotonin decreases native varicosity density in older larvae, and these acute effects are reversible. The effects of serotonin appear to be selective for serotonergic varicosities, as dopaminergic and corazonergic varicosities remain qualitatively intact following serotonin application.