Aberrant protein processing with tissue deposition is associated with many common neurodegenerative disorders; however, the complex interplay of genetic and environmental factors has made it difficult to decipher the sequence of events linking protein aggregation with clinical disease. Substantial progress has been made toward understanding the pathophysiology of prototypical conformational diseases and protein polymerization in the superfamily of serine proteinase inhibitors (serpins). Here we describe a new disease, familial encephalopathy with neuroserpin inclusion bodies, characterized clinically as an autosomal dominantly inherited dementia, histologically by unique neuronal inclusion bodies and biochemically by polymers of the neuron-specific serpin, neuroserpin. We report the cosegregation of point mutations in the neuroserpin gene (PI12) with the disease in two families. The significance of one mutation, S49P, is evident from its homology to a previously described serpin mutations, whereas that of the other, S52R, is predicted by modelling of the serpin template. Our findings provide a molecular mechanism for a familial dementia and imply that inhibitors of protein polymerization may be effective therapies for this disorder and perhaps for other more common neurodegenerative diseases.