Lyon, who most recently produced Disney/Spyglass' comedy Stick It starring Jeff Bridges, will report directly to King while working closely with vice president of 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. 'She is going to be a great asset here at Initial and I am delighted to welcome her aboard.'
'Graham and the team at Initial have done an amazing job of delivering both quality and quantity to the marketplace,' Lyon said.
'I look forward to expanding our slate of new material and supporting both the established and emerging film-makers that look to Initial as a partner in realising their films.'
Lyon previously served as president of Red Wagon Entertainment, where she oversaw development and served as executive producer on Stuart Little 2, Win A Date With Tad Hamilton and Peter Pan.
Prior to Red Wagon she was president of Jersey Films and played a development role on Out Of Sight. She began her career as vice president of development at Silver Pictures followed by a period as a Disney executive.