Myelinated fibers are organized into distinct domains that are necessary for saltatory conduction. These domains include the nodes of Ranvier and the flanking paranodal regions where glial cells closely appose and form specialized septate-like junctions with axons. These junctions contain a Drosophila Neurexin IV-related protein, Caspr/Paranodin (NCP1). Mice that lack NCP1 exhibit tremor, ataxia, and significant motor paresis. In the absence of NCP1, normal paranodal junctions fail to form, and the organization of the paranodal loops is disrupted. Contactin is undetectable in the paranodes, and K⁺ channels are displaced from the juxtaparanodal into the paranodal domains. Loss of NCP1 also results in a severe decrease in peripheral nerve conduction velocity. These results show a critical role for NCP1 in the delineation of specific axonal domains and the axon-glia interactions required for normal saltatory conduction.