Neuroaxonal dystrophy (NAD) is a morphological abnormality in man and animals that is characterized by the occurrence of numerous axonal swellings (spheroids) in the nervous system. NAD has been described in Suffolk lambs in the USA, Merino lambs in Australia and several breeds of sheep in New Zealand. This paper describes the clinicopathological changes of only the second occurrence of NAD reported in Merino lambs. There were some features (myelin loss, gliosis and visual impairment) in these Australian cases that have not been reported previously in ovine NAD. Application of immunohistochemical markers of axonal transport suggested that disruption of this transport mechanism contributed to spheroid development.