Lyon, who reports to King, takes the job immediately and will lead Initial's team, comprising vp development Grey Rembert and production executive Denis O'Sullivan.
"Gail elegantly combines the skills of hands-on production and development of first-class, provocative material that really stands out," King said.
Added Lyon, "I look forward to expanding our slate of new material and supporting both the established and emerging filmmakers that look to Initial as a partner in realizing their films."
Lyon recently produced the teen movie Stick It for Buena Vista Pictures. She was president of Red Wagon Entertainment, where she oversaw development and was executive producer on Stuart Little 2, Win a Date With Tad Hamilton and Peter Pan. While there, she brought in Jarhead and RV.
Before Red Wagon, she was president of Jersey Films, where she was involved in the development of Out of Sight, executive produced the HBO movie Pentagon Wars and co-produced Gattaca and Erin Brockovich.