Confining neuronal activity to specific subcellular regions is a mechanism for expanding the computational properties of neurons. While the circuit organization underlying compartmentalized activity has been studied in several systems1–4, its cellular basis remains elusive. Here, we characterize compartmentalized activity in Caenorhabditis elegans RIA interneurons, which display multiple reciprocal connections to head motor neurons and receive input from sensory pathways. We show that RIA spatially encodes head movement on a subcellular scale through axonal compartmentalization. This subcellular axonal activity is dependent on cholinergic input from head motor neurons and is simultaneously present and additive with glutamate-dependent globally synchronized activity evoked by sensory inputs. Postsynaptically, the muscarinic acetylcholine receptor (mAchR) GAR-3 acts in RIA to compartmentalize axonal activity through mobilization of intracellular calcium stores. The compartmentalized activity functions independently from the synchronized activity to modulate locomotory behavior.