Central nervous system (CNS) circuit development requires subcellular control of synapse formation and patterning of synapse abundance. We identified the Drosophila membrane-anchored phosphatase of regenerating liver (Prl-1) as an axon-intrinsic factor that promotes synapse formation in a spatially restricted fashion. The loss of Prl-1 in mechanosensory neurons reduced the number of CNS presynapses localized on a single axon collateral and organized as a terminal arbor. Flies lacking all Prl-1 protein had locomotor defects. The overexpression of Prl-1 induced ectopic synapses. In mechanosensory neurons, Prl-1 modulates the insulin receptor (InR) signaling pathway within a single contralateral axon compartment, thereby affecting the number of synapses. The axon branch-specific localization and function of Prl-1 depend on untranslated regions of the prl-1 messenger RNA (mRNA). Therefore, compartmentalized restriction of Prl-1 serves as a specificity factor for the subcellular control of axonal synaptogenesis.