Liquid-liquid phase separation enables the assembly of membrane-less subcellular compartments, but testing its biological functions has been difficult. The presynaptic active zone, protein machinery in nerve terminals that defines sites for neurotransmitter release, may be organized through phase separation. Here, we discover that the active zone protein Liprin-α3 rapidly and reversibly undergoes phase separation upon phosphorylation by PKC at a single site. RIM and Munc13 are co-recruited to membrane-attached condensates, and phospho-specific antibodies establish Liprin-α3 phosphorylation in vivo. At synapses of newly generated Liprin-α2/α3 double knockout mice, RIM, Munc13 and the pool of releasable vesicles were reduced. Re-expression of Liprin-α3 restored these defects, but mutating the Liprin-α3 phosphorylation site to abolish phase condensation prevented rescue. Finally, PKC activation acutely increased RIM, Munc13 and neurotransmitter release, which depended on the presence of phosphorylatable Liprin-α3. We conclude that Liprin-α3 phosphorylation rapidly triggers presynaptic phase separation to modulate active zone structure and function.