Severe reduction in Survival Motor Neuron 1 (SMN1) protein in humans causes Spinal Muscular Atrophy (SMA), a debilitating childhood disease that leads to progressive impairment of the neuro-muscular system. Although previous studies have attempted to identify the tissue(s) in which SMN1 loss most critically leads to disease, tissue-specific functions for this widely expressed protein still remain unclear. Here, we have leveraged RNA interference methods to manipulate SMN function selectively in Drosophila neurons or muscles followed by behavioral and electrophysiological analysis. High resolution measurement of motor performance shows profound alterations in locomotor patterns following pan-neuronal knockdown of SMN. Further, locomotor phenotypes can be elicited by SMN knockdown in motor neurons, supporting previous demonstrations of motor neuron-specific SMN function in mice. Electrophysiologically, SMN modulation in muscles reveals largely normal synaptic transmission, quantal release and trans-synaptic homeostatic compensation at the larval neuro-muscular junction. Neuronal SMN knockdown does not alter baseline synaptic transmission, the dynamics of synaptic depletion or acute homeostatic compensation. However, chronic glutamate receptor-dependent developmental homeostasis at the neuro-muscular junction is strongly attenuated following reduction of SMN in neurons. Together, these results support a distributed model of SMN function with distinct neuron-specific roles that are likely to be compromised following global loss of SMN in patients. While complementary to, and in broad agreement with, recent mouse studies that suggest a strong necessity for SMN in neurons, our results uncover a hitherto under-appreciated role for SMN in homeostatic regulatory mechanisms at motor synapses.