The gracile axonal dystrophy (gad) mouse is an autosomal recessive mutant that shows sensory ataxia at an early stage, followed by motor ataxia at a later stage. Pathologically, the mutant is characterized by 'dying-back' type axonal degeneration and formation of spheroid bodies in nerve terminals. Recent pathological observations have associated brain ageing and neurodegenerative diseases with progressive accumulation of ubiquitinated protein conjugates. In gad mice, accumulation of amyloid beta-protein and ubiquitin-positive deposits occur retrogradely along the sensory and motor nervous systems. We previously reported that the gad mutation was transmitted by a gene on chromosome 5 (refs 10,11). Here we find that the gad mutation is caused by an in-frame deletion including exons 7 and 8 of Uchl1, encoding the ubiquitin carboxy-terminal hydrolase (UCH) isozyme (Uch-l1) selectively expressed in the nervous system and testis. The gad allele encodes a truncated Uch-l1 lacking a segment of 42 amino acids containing a catalytic residue. As Uch-l1 is thought to stimulate protein degradation by generating free monomeric ubiquitin, the gad mutation appears to affect protein turnover. Our data suggest that altered function of the ubiquitin system directly causes neurodegeneration. The gad mouse provides a useful model for investigating human neurodegenerative disorders.