The site at which action potentials initiate within the terminal region of unmyelinated sensory axons has not been resolved. Combining recordings of nerve terminal impulses (NTIs) and collision analysis, the site of action potential initiation in guinea‐pig corneal cold receptors was determined. For most receptors (77%), initiation mapped to a point in the time domain that was closer to the nerve terminal than to the site of electrical stimulation at the back of the eye. Guinea‐pig corneal cold receptors are Aδ‐neurones that lose their myelin sheath at the point where they enter the cornea, and therefore their axons conduct more slowly within the cornea. Allowing for this inhomogeneity in conduction speed, the resulting spatial estimates of action potential initiation sites correlated with changes in NTI shape predicted by simulation of action potentials initiating within a nerve terminal. In some receptors, more than one NTI shape was observed. Simulations of NTI shape suggest that the origin of differing NTI shapes result from action potentials initiating at different, spatially discrete, locations within the nerve terminal. Importantly, the relative incidence of NTI shapes resulting from action potential initiation close to the nerve termination increased during warming when nerve activity decreased, indicating that the favoured site of action potential initiation shifts toward the nerve terminal when it hyperpolarizes. This finding can be explained by a hyperpolarization‐induced relief of Na⁺ channel inactivation in the nerve terminal. The results provide direct evidence that the molecular entities responsible for stimulus transduction and action potential initiation reside in parallel with one another in the unmyelinated nerve terminals of cold receptors.