Neurotrophins secreted by the postsynaptic target cell may participate in activity-dependent synaptic modification during development and in the mature brain. A fundamental question of how neurotrophins can sculpt synaptic connections is whether neurotrophin-induced synaptic changes are spatially restricted to the site of neurotrophin secretion or whether they can spread to neighboring synapses. Using a model system of nerve-muscle coculture in which neurotrophin-4 (NT-4) is overexpressed in a subpopulation of postsynaptic myocytes, we demonstrated that presynaptic potentiation is restricted to synapses on myocytes overexpressing NT-4 without affecting nearby synapses formed by the same neuron on control myocytes. Likewise, postsynaptic modulation of acetylcholine channels by secreted NT-4 is spatially restricted to <60 micron from the site of NT-4 secretion. Therefore, activity-dependent secretion of neurotrophins can result in highly localized modification of neuronal connections.