Folate deficiency and resultant increased homocysteine levels have been linked experimentally and epidemiologically with neurodegenerative conditions like stroke and dementia. Moreover, folate deficiency has been implicated in the pathogenesis of psychiatric disorders, most notably depression. We hypothesized that the pathogenic mechanisms include uracil misincorporation and, therefore, analyzed the effects of folate deficiency in mice lacking uracil DNA glycosylase (Ung−/−) versus wild-type controls. Folate depletion increased nuclear mutation rates in Ung−/− embryonic fibroblasts, and conferred death of cultured Ung−/− hippocampal neurons. Feeding animals a folate-deficient diet (FD) for 3 months induced degeneration of CA3 pyramidal neurons in Ung−/− but not Ung+/+ mice along with decreased hippocampal expression of brain-derived neurotrophic factor protein and decreased brain levels of antioxidant glutathione. Furthermore, FD induced cognitive deficits and mood alterations such as anxious and despair-like behaviors that were aggravated in Ung−/− mice. Independent of Ung genotype, FD increased plasma homocysteine levels, altered brain monoamine metabolism, and inhibited adult hippocampal neurogenesis. These results indicate that impaired uracil repair is involved in neurodegeneration and neuropsychiatric dysfunction induced by experimental folate deficiency.