Prion-like domains (PLDs), defined by their low sequence complexity and intrinsic disorder, are present in hundreds of human proteins. Although gain-of-function mutations in the PLDs of neuronal RNA-binding proteins have been linked to neurodegenerative disease progression, the physiological role of PLDs and their range of molecular functions are still largely unknown. Here, we show that the PLD of Drosophila Imp, a conserved component of neuronal ribonucleoprotein (RNP) granules, is essential for the developmentally-controlled localization of Imp RNP granules to axons and regulates in vivo axonal remodeling. Furthermore, we demonstrate that Imp PLD restricts, rather than promotes, granule assembly, revealing a novel modulatory function for PLDs in RNP granule homeostasis. Swapping the position of Imp PLD compromises RNP granule dynamic assembly but not transport, suggesting that these two functions are uncoupled. Together, our study uncovers a physiological function for PLDs in the spatio-temporal control of neuronal RNP assemblies.