Canavan Disease (CD) is a recessive leukodystrophy caused by loss of function mutations in the gene encoding aspartoacylase (ASPA), an oligodendrocyte-enriched enzyme that hydrolyses N-acetylaspartate (NAA) to acetate and aspartate. The neurological phenotypes of different rodent models of CD vary considerably. Here we report on a novel targeted aspa mouse mutant expressing the bacterial β-Galactosidase (lacZ) gene under the control of the aspa regulatory elements. X-Gal staining in known ASPA expression domains confirms the integrity of the modified locus in heterozygous aspa lacZ-knockin (aspa^lacZ/+) mice. In addition, abundant ASPA expression was detected in Schwann cells. Homozygous (aspa^lacZ/lacZ) mutants are ASPA-deficient, show CD-like histopathology and moderate neurological impairment with behavioural deficits that are more pronounced in aspa^lacZ/lacZ males than females. Non-invasive ultrahigh field proton magnetic resonance spectroscopy revealed increased levels of NAA, myo-inositol and taurine in the aspa^lacZ/lacZ brain. Spongy degeneration was prominent in hippocampus, thalamus, brain stem, and cerebellum, whereas white matter of optic nerve and corpus callosum was spared. Intracellular vacuolisation in astrocytes coincides with axonal swellings in cerebellum and brain stem of aspa^lacZ/lacZ mutants indicating that astroglia may act as an osmolyte buffer in the aspa-deficient CNS. In summary, the aspa^lacZ mouse is an accurate model of CD and an important tool to identify novel aspects of its complex pathology.