HD (Huntington's disease) is caused by an expanded polyQ (polyglutamine) repeat in the htt (huntingtin protein). GABAergic medium spiny neurons in the striatum are mostly affected in HD. However, mhtt (mutant huntingtin)-induced molecular changes in these neurons remain largely unknown. The present study focuses on the effect of mhtt on the subcellular localization of GAD (glutamic acid decarboxylase), the enzyme responsible for synthesizing GABA (γ-aminobutyric acid). We report that the subcellular distribution of GAD is significantly altered in two neuronal cell lines that express either the N-terminus of mhtt or full-length mhtt. GAD65 is predominantly associated with the Golgi membrane in cells expressing normal htt; however, it diffuses in the cytosol of cells expressing mhtt. As a result, vesicle-associated GAD65 trafficking is impaired. Since palmitoylation of GAD65 is required for GAD65 trafficking, we then demonstrate that palmitoylation of GAD65 is reduced in the HD model. Furthermore, overexpression of HIP14 (huntingtin-interacting protein 14), the enzyme responsible for palmitoylating GAD65 in vivo, could rescue GAD65 palmitoylation and vesicle-associated GAD65 trafficking. Taken together, our data support the idea that GAD65 palmitoylation is important for the delivery of GAD65 to inhibitory synapses and suggest that impairment of GAD65 palmitoylation by mhtt may lead to altered inhibitory neurotransmission in HD.