Neuropathy target esterase (NTE) is a neuronal membrane protein originally identified for its property to be modified by organo-phosphates (OPs), which in humans cause neuropathy characterized by axonal degeneration. Drosophila mutants for the homolog gene of NTE, swisscheese (sws), indicated a possible involvement of sws in the regulation of axon-glial cell interaction during glial wrapping. However, the role of NTE/sws in mammalian brain pathophysiology remains unknown. To investigate NTE function in vivo, we used the cre/loxP site-specific recombination strategy to generate mice with a specific deletion of NTE in neuronal tissues. Here we show that loss of NTE leads to prominent neuronal pathology in the hippocampus and thalamus and also defects in the cerebellum. Absence of NTE resulted in disruption of the endoplasmic reticulum, vacuolation of nerve cell bodies, and abnormal reticular aggregates. Thus, these results identify a physiological role for NTE in the nervous system and indicate that a loss-of-function mechanism may contribute to neurodegenerative diseases characterized by vacuolation and neuronal loss.