The signals involved in axonal trafficking and presynaptic clustering are poorly defined. Here we show that targeting of the γ-aminobutyric acid–synthesizing enzyme glutamate decarboxylase 65 (GAD65) to presynaptic clusters is mediated by its palmitoylated 60-aa NH₂-terminal domain and that this region can target other soluble proteins and their associated partners to presynaptic termini. A Golgi localization signal in aa 1–23 followed by a membrane anchoring signal upstream of the palmitoylation motif are required for this process and mediate targeting of GAD65 to the cytosolic leaflet of Golgi membranes, an obligatory first step in axonal sorting. Palmitoylation of a third trafficking signal downstream of the membrane anchoring signal is not required for Golgi targeting. However, palmitoylation of cysteines 30 and 45 is critical for post-Golgi trafficking of GAD65 to presynaptic sites and for its relative dendritic exclusion. Reduction of cellular cholesterol levels resulted in the inhibition of presynaptic clustering of palmitoylated GAD65, suggesting that the selective targeting of the protein to presynaptic termini is dependent on sorting to cholesterol-rich membrane microdomains. The palmitoylated NH₂-terminal region of GAD65 is the first identified protein region that can target other proteins to presynaptic clusters.