Numerous neurological diseases are associated with dysregulated lipid metabolism; however, the basic metabolic control of fatty acid metabolism in neurons remains enigmatic. Here we have shown that neurons have abundant expression and activity of the long-chain cytoplasmic acyl coenzyme A (acyl-CoA) thioesterase 7 (ACOT7) to regulate lipid retention and metabolism. Unbiased and targeted metabolomic analysis of fasted mice with a conditional knockout of ACOT7 in the nervous system, Acot7^N−/−, revealed increased fatty acid flux into multiple long-chain acyl-CoA-dependent pathways. The alterations in brain fatty acid metabolism were concomitant with a loss of lean mass, hypermetabolism, hepatic steatosis, dyslipidemia, and behavioral hyperexcitability in Acot7^N−/− mice. These failures in adaptive energy metabolism are common in neurodegenerative diseases. In agreement, Acot7^N−/− mice exhibit neurological dysfunction and neurodegeneration. These data show that ACOT7 counterregulates fatty acid metabolism in neurons and protects against neurotoxicity.