Neuronal growth regulator 1 (NEGR1) is a synaptic plasma membrane localized cell adhesion molecule implicated in a wide spectrum of psychiatric disorders. By RNAseq analysis of the transcriptomic changes in the brain of NEGR1‐deficient mice, we found that NEGR1 deficiency affects the expression of the Gad2 gene. We show that glutamic acid decarboxylase 65 (GAD65), the Gad2 ‐ encoded enzyme synthesizing the inhibitory neurotransmitter GABA on synaptic vesicles, accumulates non‐synaptically in brains of NEGR1‐deficient mice. The density of non‐synaptic GAD65 accumulations is also increased in NEGR1 deficient cultured hypothalamic neurons, and this effect is rescued by re‐expression of NEGR1. By using a novel biosensor of the plasma membrane attachment of GAD65, we demonstrate that GAD65 attaches to the plasma membrane. NEGR1 promotes palmitoylation‐dependent clearance of GAD65 from the plasma membrane and targeting of GAD65 to plasma membrane‐derived endocytic vesicles. In NEGR1 deficient cultured hypothalamic neurons, the synaptic and extrasynaptic levels of the plasma membrane attached GAD65 are increased, and the synaptic levels of GABA are reduced. NEGR1‐deficient mice are characterized by reduced body weight, lower GABAergic synapse densities in the arcuate nucleus, and blunted responsiveness to the reinforcing effects of food rewards. Our results indicate that abnormalities in synaptic GABA synthesis can contribute to brain disorders associated with abnormal expression of NEGR1 in humans.image