The axon initial segment (AIS) is the specialized compartment of vertebrate axons where action potentials are initiated. Despite longtime attention to the unique functions of this compartment, the mechanisms that regulate AIS formation and maintenance are not known. Here, we identify a novel compartment in Drosophila mushroom body neurons that mirrors the molecular hallmarks of the vertebrate AIS as judged by accumulation of the anchoring protein Ankyrin1, presence of a specialized actin cytoskeleton, exclusion of both axon-specific and somatodendritic-specific cell surface proteins, and accumulation of a unique combination of voltage-gated ion channels. Using pharmacological treatments, we show that, similar to the vertebrate AIS, the integrity of this region of γ-neurons and its ability to tether membrane proteins depends on an intact actin cytoskeleton. We further show that Cdk5/p35 kinase regulates the formation and maintenance of the putative AIS by controlling the position of its distal boundary. Thus, boosting Cdk5 activity in γ-neurons extends the AIS by as much as 100%, while eliminating Cdk5 activity causes the domain to shrink proximally or disappear altogether. These data demonstrate that Cdk5/p35 kinase is a key regulator of the development and maintenance of the AIS in Drosophila.