A deficiency of palmitoyl protein thioesterase (PPT) leads to the neurodegenerative disease infantile neuronal ceroid lipofuscinosis (INCL), which is characterized by an almost complete loss of cortical neurons. PPT expressed in COS-1 cells is recognized by the mannose-6-phosphate receptor (M6PR) and is routed to lysosome, but a substantial fraction of PPT is secreted. We have here determined the neuronal localization of PPT by confocal microscopy, cryoimmunoelectron microscopy and cell fractionation. In mouse primary neurons and brain tissue, PPT is localized in synaptosomes and synaptic vesicles but not in lysosomes. Furthermore, in polarized epithelial Caco-2 cells, PPT is localized exclusively to the basolateral site, in contrast to the classical lysosomal enzyme, aspartylglucosaminidase (AGA), which is localized in the apical site. The current data imply that PPT has a role outside the lysosomes in the brain and may be associated with synaptic functioning. This finding opens a new route to study the neuropathological events associated with INCL.