The shape of the axonal arborization was studied in an identified insect sensory neuron. The distribution of presynaptic varicosities within an axonal arbor was shown to be modulated by the density of neighboring terminals. Removal of neighbors near one portion of the axon terminal increased the growth rate in the denervated region and caused a compensatory retraction in other regions. The results support the hypothesis that the size of an axonal arbor is determined intrinsically, whereas the distribution of varicosities within the terminal is determined extrinsically by neighboring terminals. These findings provide a direct demonstration of the effects of competition on an identified nerve cell, as well as one of the first examples of competitive interactions in an invertebrate central nervous system.