Rapid energy-efficient signaling along vertebrate axons is achieved through intricate subcellular arrangements of voltage-gated ion channels and myelination. One recently appreciated example is the tight colocalization of Kv7 potassium channels and voltage-gated sodium (Nav) channels in the axonal initial segment and nodes of Ranvier. The local biophysical properties of these Kv7 channels and the functional impact of colocalization with Nav channels remain poorly understood. Here, we quantitatively examined Kv7 channels in myelinated axons of rat neocortical pyramidal neurons using high-resolution confocal imaging and patch-clamp recording. Kv7.2 and 7.3 immunoreactivity steeply increased within the distal two-thirds of the axon initial segment and was mirrored by the conductance density estimates, which increased from ∼12 (proximal) to 150 pS μm−2 (distal). The axonal initial segment and nodal M-currents were similar in voltage dependence and kinetics, carried by Kv7.2/7.3 heterotetramers, 4% activated at the resting membrane potential and rapidly activated with single-exponential time constants (∼15 ms at 28 mV). Experiments and computational modeling showed that while somatodendritic Kv7 channels are strongly activated by the backpropagating action potential to attenuate the afterdepolarization and repetitive firing, axonal Kv7 channels are minimally recruited by the forward-propagating action potential. Instead, in nodal domains Kv7.2/7.3 channels were found to increase Nav channel availability and action potential amplitude by stabilizing the resting membrane potential. Thus, Kv7 clustering near axonal Nav channels serves specific and context-dependent roles, both restraining initiation and enhancing conduction of the action potential.