There are two main forms of hereditary neutropenia: cyclic and severe congenital neutropenia (SCN). Cyclic neutropenia is an autosomal dominant disorder in which neutrophil counts fluctuate between nearly normal levels and close to zero with 21-day periodicity. In contrast, SCN, also known as Kostmann syndrome, consists of chronic and profound neutropenia, with a characteristic promyelocytic maturation arrest in the bone marrow. Unlike cyclic neutropenia, SCN displays frequent acquisition of somatic mutations in the gene, CSF3R, encoding the Granulocyte Colony-Stimulating Factor Receptor (G-CSFR), and a strong predisposition to developing myelodysplasia (MDS) and/or acute myeloid leukemia (AML). Cyclic neutropenia is caused by heterozygous mutations in the gene, ELANE (formerly known as ELA2), encoding the neutrophil granule serine protease, neutrophil elastase. SCN is genetically heterogeneous, but it is most frequently associated with ELANE mutations. While some of the different missense mutations in ELANE exhibit phenotype-genotype correlation, the same mutations are sometimes found in patients with either form of inherited neutropenia. The mutations lead to production of a mutant polypeptide, but no common biochemical abnormality, including effects on proteolysis, has been identified. Two non-mutually exclusive theories have been advanced to explain how the mutations might produce neutropenia. The mislocalization hypothesis states that mutations within neutrophil elastase or involving other proteins responsible for its intracellular trafficking cause neutrophil elastase to accumulate in inappropriate subcellular compartments. The misfolding hypothesis proposes that mutations prevent the protein from properly folding, thereby inducing the stress response pathway within the endoplasmic reticulum (ER). We discuss how the mutations themselves provide clues into pathogenesis, describe supporting and contradictory observations for both theories, and highlight outstanding questions relating to pathophysiology of neutropenia.