The Drosophila Augmin complex localizes γ-tubulin to the microtubules of the mitotic spindle, regulating the density of spindle microtubules in tissue culture cells. Here, we identify the microtubule-associated protein Msd1 as a new component of the Augmin complex and demonstrate directly that it is required for nucleation of microtubules from within the mitotic spindle. Although Msd1 is necessary for embryonic syncytial mitoses, flies possessing a mutation in msd1 are viable. Importantly, however, in the absence of centrosomes, microtubule nucleation from within the spindle becomes essential. Thus, the Augmin complex has a crucial role in the development of the fly.