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The mechanisms by which synaptic partners recognize each other and establish appropriate numbers of connections during embryonic development to form functional neural circuits are poorly understood. We combined electron microscopy reconstruction, functional imaging of neural activity, and behavioral experiments to elucidate the roles of (1) partner identity, (2) location, and (3) activity in circuit assembly in the embryonic nerve cord of Drosophila. We found that postsynaptic partners are able to find and connect to their presynaptic partners even when these have been shifted to ectopic locations or silenced. However, orderly positioning of axon terminals by positional cues and synaptic activity is required for appropriate numbers of connections between specific partners, for appropriate balance between excitatory and inhibitory connections, and for appropriate functional connectivity and behavior. Our study reveals with unprecedented resolution the fine connectivity effects of multiple factors that work together to control the assembly of neural circuits.