N-Acetyl-L-aspartate (NAA) is an amino acid that is present in the vertebrate brain. Its concentration is one of the highest of all free amino acids and, although NAA is synthesized and stored primarily in neurons, it cannot be hydrolyzed in these cells. Furthermore, neuronal NAA is dynamic and turns over more than once each day by virtue of its continuous efflux, in a regulated intercompartmental cycling via extracellular fluids, between neurons and a second compartment in oligodendrocytes. The metabolism of NAA, between its anabolic compartment in neurons and its catabolic compartment in oligodendrocytes, and its possible physiological role in the brain has been the subject of much speculation. There are two human inborn errors in metabolism of NAA. One is Canavan disease (CD), in which there is a buildup of NAA (hyperacetylaspartia) and associated spongiform leukodystrophy, caused by a lack of aspartoacylase activity. The other is a singular human case of lack of NAA (hypoacetylaspartia), where the enzyme that synthesizes NAA is apparently absent. There are two animal models currently available for studies of CD. One is a rat with a natural deletion of the catabolic enzyme, and the other a gene knockout mouse. In addition to the presence of NAA in neurons, its prominence in 1H nuclear magnetic resonance spectroscopic studies has led to its wide use in diagnostic human medicine as both an indicator of brain pathology and of disease progression in a variety of CNS diseases. In this review, various hypotheses regarding the metabolism of NAA and its possible role in the CNS are evaluated. Based on this analysis, it is concluded that although NAA may have several functions in the CNS, an important role of the NAA intercompartmental system is osmoregulatory, and in this role it may be the primary mechanism for the removal of intracellular water, against a water gradient, from myelinated neurons.