Mutations in the pantothenate kinase 2 (PANK2) gene have been identified in patients with neurodegeneration with brain iron accumulation (NBIA; formerly Hallervorden-Spatz disease). However, the mechanisms by which these mutations cause neurodegeneration are unclear, especially given the existence of multiple pantothenate kinase genes in humans and multiple PanK2 transcripts with potentially different subcellular localizations. We demonstrate that PanK2 protein is localized to mitochondria of neurons in human brain, distinguishing it from other pantothenate kinases that do not possess mitochondrial-targeting sequences. PanK2 protein translated from the most 5' start site is sequentially cleaved at two sites by the mitochondrial processing peptidase, generating a long-lived 48 kDa mature protein identical to that found in human brain extracts. The mature protein catalyzes the initial step in coenzyme A (CoA) synthesis but displays feedback inhibition in response to species of acyl CoA rather than CoA itself. Some, but not all disease-associated point mutations result in significantly reduced catalytic activity. The most common mutation, G521R, results in marked instability of the intermediate PanK2 isoform and reduced production of the mature isoform. These results suggest that NBIA is caused by altered neuronal mitochondrial lipid metabolism caused by mutations disrupting PanK2 protein levels and catalytic activity.