Folding of transmembrane and secretory proteins occurs in the lumen of the endoplasmic reticulum (ER) before transportation to the cell surface and is monitored by the unfolded protein response (UPR) signaling pathway. The accumulation of unfolded proteins in the ER activates the UPR that restores ER homeostasis by regulating gene expression that leads to an increase in the protein-folding capacity of the ER and a decrease in the ER protein-folding load. However, prolonged UPR activity has been associated with cell death in multiple pathological conditions, including neurodegeneration. Here, we report a spontaneous recessive mouse mutation that causes progressive cerebellar granule cell death and peripheral motor axon degeneration. By positional cloning, we identify the mutation in this strain as a retrotransposon insertion in the Clcc1 gene, which encodes a putative chloride channel localized to the ER. Furthermore, we demonstrate that the C3H/HeSnJ inbred strain has late onset cerebellar degeneration due to this mutation. Interestingly, acute knockdown of Clcc1 expression in cultured cells increases sensitivity to ER stress. In agreement, GRP78, the major HSP70 family chaperone in the ER, is upregulated in Clcc1-deficient granule cells in vivo, and ubiquitinated proteins accumulate in these neurons before their degeneration. These data suggest that disruption of chloride homeostasis in the ER disrupts the protein-folding capacity of the ER, leading to eventual neuron death.