Functional regeneration after nervous system injury requires transected axons to reconnect with their original target tissue. Axonal fusion, a spontaneous regenerative mechanism identified in several species, provides an efficient means of achieving target reconnection as a regrowing axon is able to contact and fuse with its own separated axon fragment, thereby re-establishing the original axonal tract. Here we report a molecular characterization of this process in Caenorhabditis elegans, revealing dynamic changes in the subcellular localization of the EFF-1 fusogen after axotomy, and establishing phosphatidylserine (PS) and the PS receptor (PSR-1) as critical components for axonal fusion. PSR-1 functions cell-autonomously in the regrowing neuron and, instead of acting in its canonical signalling pathway, acts in a parallel phagocytic pathway that includes the transthyretin protein TTR-52, as well as CED-7, NRF-5 and CED-6 (refs 9, 10, 11, 12). We show that TTR-52 binds to PS exposed on the injured axon, and can restore fusion several hours after injury. We propose that PS functions as a 'save-me' signal for the distal fragment, allowing conserved apoptotic cell clearance molecules to function in re-establishing axonal integrity during regeneration of the nervous system.