Juvenile neuronal ceroid lipofuscinosis (JNCL) is due to mutations in the CLN3 gene. We previously determined that CLN3 protein harbors a highly conserved motif, VYFAE, necessary for its impact on cell growth and apoptosis. Using molecular modeling we demonstrated that this motif is embedded in a stretch of amino acids that is homologous to and structurally compatible with a galactosylceramide (GalCer) binding domain. This domain is present in the V3 loop of the HIV-1 gp120 envelope protein, beta-amyloid protein, and the infectious form of prionic protein, and defines a binding site for lipid rafts. We determined the subcellular localization of CLN3 in different cell systems including human neurons, primary rat hippocampal neurons, normal human fibroblasts, and JNCL fibroblasts homozygous for the 1.02 kb deletion in genomic DNA. Wild-type CLN3 protein was present within Golgi, lipid rafts in the plasma membrane, and early recycling endosomes, but not late endosomes/lysosomes. Wild-type CLN3 internalized from the plasma membrane to the Golgi via Rab4- and Rab11-positive recycling endosomes. Wild-type CLN3 co-localized with GalCer in the Golgi and in lipid rafts at the plasma membrane in normal cells. Neither mutant CLN3 protein nor GalCer were found at the plasma membrane in JNCL fibroblasts. Mutant CLN3p was retained within the Golgi and partially mis-localized to lysosomes, failing to reach recycling endosomes, plasma membrane, or lipid rafts. These studies identify a novel CLN3 domain that may dictate localization and function of CLN3.