Action potentials (APs) provide the primary means of rapid information transfer in the nervous system. Where exactly these signals are initiated in neurons has been a basic question in neurobiology and the subject of extensive study. Converging lines of evidence indicate that APs are initiated in a discrete and highly specialized portion of the axon-the axon initial segment (AIS). The authors review key aspects of the organization and function of the AIS and focus on recent work that has provided important insights into its electrical signaling properties. In addition to its main role in AP initiation, the new findings suggest that the AIS is also a site of complex AP modulation by specific types of ion channels localized to this axonal domain.