Batten disease [juvenile-onset neuronal ceroid lipofuscinosis (JNCL)], the most common progressive encephalopathy of childhood, is caused by mutations in a novel lysosomal membrane protein (CLN3) with unknown function. In this study, we have confirmed the lysosomal localization of the CLN3 protein by immunoelectron microscopy by co-localizing it with soluble and membrane-associated lysosomal proteins. We have analysed the intracellular processing and localization of two mutants, 461-677del, which is present in 85% of CLN3 alleles and causes the classical JNCL, and E295K [corrected], which is a rare missense mutation associated with an atypical form of JNCL. Pulse-chase labelling and immunoprecipitation of the two mutant proteins in COS-1-cells indicated that 461-677del is synthesized as an approximately 24 kDa truncated polypeptide, whereas the maturation of E295K [corrected] resembles that of the wild-type CLN3 polypeptide. Transient expression of the two mutants in BHK cells showed that 461-677del is retained in the endoplasmic reticulum, whereas E295K [corrected] was capable of reaching the lysosomal compartment. The CLN3 polypeptides were expressed further in mouse primary neurons where the wild-type CLN3 protein was localized both in the cell soma and in neuronal extensions, whereas the 461-677del mutant was arrested in the cell soma. Interestingly, co-localization of the wild-type CLN3 and E295K [corrected] proteins with a synaptic vesicle marker indicates that the CLN3 protein might participate in synaptic vesicle transport/transmission. The data presented here provide clear evidence for a cellular distinction between classical and atypical forms of Batten disease both in neural and non-neural cells.