Alterations in mitochondrial dynamics (fission, fusion, and movement) are implicated in many neurodegenerative diseases, from rare genetic disorders such as Charcot-Marie-Tooth disease, to common conditions including Alzheimer's disease. However, the relationship between altered mitochondrial dynamics and neurodegeneration is incompletely understood. Here we show that disease associated MFN2 proteins suppressed both mitochondrial fusion and transport, and produced classic features of segmental axonal degeneration without cell body death, including neurofilament filled swellings, loss of calcium homeostasis, and accumulation of reactive oxygen species. By contrast, depletion of Opa1 suppressed mitochondrial fusion while sparing transport, and did not induce axonal degeneration. Axon degeneration induced by mutant MFN2 proteins correlated with the disruption of the proper mitochondrial positioning within axons, rather than loss of overall mitochondrial movement, or global mitochondrial dysfunction. We also found that augmenting expression of MFN1 rescued the axonal degeneration caused by MFN2 mutants, suggesting a possible therapeutic strategy for Charcot-Marie-Tooth disease. These experiments provide evidence that the ability of mitochondria to sense energy requirements and localize properly within axons is key to maintaining axonal integrity, and may be a common pathway by which disruptions in axonal transport contribute to neurodegeneration.