Synapse formation during neuronal development is critical to establish neural circuits and a nervous system1. Every presynapse builds a core active zone structure where ion channels are clustered and synaptic vesicles are released2. While the composition of active zones is well characterized2,3, how active zone proteins assemble together and recruit synaptic release machinery during development is not clear. Here, we find core active zone scaffold proteins SYD-2/Liprin-α and ELKS-1 phase separate during an early stage of synapse development, and later mature into a solid structure. We directly test the in vivo function of phase separation with mutants specifically lacking this activity. These mutant SYD-2 and ELKS-1 proteins remain enriched at synapses, but are defective in active zone assembly and synapse function. The defects are rescued with the introduction of a phase separation motif from an unrelated protein. In vitro, we reconstitute the SYD-2 and ELKS-1 liquid phase scaffold and find it is competent to bind and incorporate downstream active zone components. The fluidity of SYD-2 and ELKS-1 condensates is critical for efficient mixing and incorporation of active zone components. These data reveal that a developmental liquid phase of scaffold molecules is essential for synaptic active zone assembly before maturation into a stable final structure.