Palmitoyl protein thioesterase 1 (PPT1) is a depalmitoylating enzyme whose deficiency leads to infantile neuronal ceroid lipofuscinosis. The disease is characterized by early loss of vision and massive neuronal death. Although PPT1 is expressed in many tissues, a deficiency of PPT1 damages neurons only in the cerebral and cerebellar cortexes and retina; other cell types remain relatively unaffected. We previously demonstrated that PPT1 is present in the synaptosomes and synaptic vesicles of neurons. To understand the crucial role of PPT1 for neuronal cells, we further investigated the expression and targeting of PPT1 in retinal, hippocampal, and cortical neurons during their maturation in culture. We found that PPT1 activity increases by neuronal maturation and is highest in retinal neuron cultures. In retinal neurons the expression of PPT1 precedes that of the synaptic vesicle protein 2 and synaptophysin, indicating a significant role for PPT1 in the early development of neuronal cells. We also found by quantitative confocal immunofluorescence microscopy that PPT1 is targeted preferably to axons in mature neurons, as indicated by its colocalization with the axonal marker microtubule‐associated protein 1. In axons PPT1 is targeted specifically to axonal varicosities and presynaptic terminals, as indicated by its significant colocalization with growth‐associated protein 43 and synaptophysin. Axonal localization of PPT1 was confirmed by double labeling with synaptophysin and postembedding immunoelectron microscopy. The polarized axonal targeting of PPT1 may well indicate a role for PPT1 in the exocytotic pathway of neurons. J. Comp. Neurol. 455:368–377, 2003. © 2002 Wiley‐Liss, Inc.