Neurons are highly polarized cells that require continuous turnover of membrane proteins at axon terminals to develop, function, and survive. Yet, it is still unclear whether membrane protein degradation requires transport back to the cell body or whether degradation also occurs locally at the axon terminal, where live observation of sorting and degradation has remained a challenge. Here, we report direct observation of two cargo-specific membrane protein degradation mechanisms at axon terminals based on a live-imaging approach in intact Drosophila brains. We show that different acidification-sensing cargo probes are sorted into distinct classes of degradative "hub" compartments for synaptic vesicle proteins and plasma membrane proteins at axon terminals. Sorting and degradation of the two cargoes in the separate hubs are molecularly distinct. Local sorting of synaptic vesicle proteins for degradation at the axon terminal is, surprisingly, Rab7 independent, whereas sorting of plasma membrane proteins is Rab7 dependent. The cathepsin-like protease CP1 is specific to synaptic vesicle hubs, and its delivery requires the vesicle SNARE neuronal synaptobrevin. Cargo separation only occurs at the axon terminal, whereas degradative compartments at the cell body are mixed. These data show that at least two local, molecularly distinct pathways sort membrane cargo for degradation specifically at the axon terminal, whereas degradation can occur both at the terminal and en route to the cell body.