The neurological mouse mutation shambling (shm) exhibits ataxia and hindlimb paresis. Positional cloning of shm showed that it encodes contactin-associated protein (Caspr), which is required for formation of the paranodal junction in myelinated nerves. The shm mutation is a TT insertion in the Caspr gene that results in a frame shift and a premature stop codon at the COOH-terminus. The truncated Caspr protein that is generated lacks the transmembrane and cytoplasmic domains. Here, we found that the nodal/paranodal axoplasm of shm mice lack paranodal junctions and contain large mitochondria and abnormal accumulations of cytoplasmic organelles that indicate altered axonal transport. Immunohistochemical analysis of mutant mice showed reduced expression of Caspr, contactin, and neurofascin 155, which are thought to form a protein complex in the paranodal region; protein 4.1B, however, was normally distributed. The mutant mice had aberrant localization of voltage-gated ion channels on the axolemma of nodal/paranodal regions. Electrophysiological analysis demonstrated that the velocity of saltatory conduction was reduced in sciatic nerves and that the visual response was attenuated in the primary visual cortex. These abnormalities likely contribute to the neurological phenotype of the mutant mice.