The polarized nature of neurons depends on their microtubule dynamics and orientation determined by both microtubule-stabilizing and destabilizing factors. The role of destabilizing factors in developing and maintaining neuronal polarity is unclear. We investigated the function of KLP-7, a microtubule depolymerizing motor of the Kinesin-13 family, in axon-dendrite compartmentalization using PVD neurons in Caenorhabditis elegans. Loss of KLP-7 caused a mislocalization of axonal proteins including RAB-3, SAD-1, and their motor UNC-104 to dendrites. This is rescued by cell-autonomous expression of the KLP-7 or colchicine treatment indicating the involvement of KLP-7-dependent microtubule depolymerization. High mobility of KLP-7 is correlated to increased microtubule dynamics in the dendrites which restricts the enrichment of UNC-44, an integral component of Axon Initial Segment (AIS) in these processes. Due to the loss of KLP-7, ectopic enrichment of UNC-44 in the dendrite potentially redirects axonal traffic into dendrites that includes plus-end out microtubules, axonal motors, and cargoes. These observations indicate that KLP-7-mediated depolymerization defines the microtubule dynamics conducive to the specific enrichment of AIS components in dendrites. This further compartmentalizes dendritic and axonal microtubules, motors, and cargoes thereby influencing neuronal polarity. [Media: see text] [Media: see text].