Fundamental to an understanding of how neurons integrate synaptic input is the knowledge of where within a neuron this information is converted into an output signal, the action potential. Although it has been known for some time that action potential initiation occurs within the axon of neurons, the precise location has remained elusive. Here, we provide direct evidence using voltage-sensitive dyes that the site of action potential initiation in cortical layer 5 pyramidal neurons is approximately 35 microm from the axon hillock. This was the case during action potential generation under a variety of conditions, after axonal inhibition, and at different stages of development. Once initiated action potentials propagated down the axon in a saltatory manner. Experiments using local application of low-sodium solution and TTX, as well as an investigation of the influence of axonal length on action potential properties, provided evidence that the initial 40 microm of the axon is essential for action potential generation. To morphologically identify the relationship between the site of action potential initiation and axonal myelination, we labeled oligodendrocytes supplying processes to the proximal region of the axon. These experiments indicated that the axon initial segment was approximately 40 mcirom in length, and the first node of Ranvier was approximately 90 microm from the axon hillock. Experiments targeting the first node of Ranvier suggested it was not involved in action potential initiation. In conclusion, these results indicate that, in layer 5 pyramidal neurons, action potentials are generated in the distal region of the axon initial segment.