Homogenates of brain stem and cortex from normal rabbit mediate the synthesis of phosphatidyl inositol from inositol and cytidine diphosphatediglyceride (CDP-diglyceride). The production of phosphatidyl inositol in brain stem homogenates from ataxic rabbits is severely decreased due to increased breakdown of CDP-diglyceride. Homogenates from cortex of diseased animals show no such degradation. The breakdown is roughly proportional to the severity of the disease. The pattern of breakdown of CDP-diglyceride is described and the new end products tentatively identified as free fatty acids and triglycerides. The observations explain satisfactorily the decrease in polyphosphoinositides in the brain stem associated with the ataxia. Alternative explanations for this disease were refuted by the finding of normal activity rates of triphosphoinositide diesterase, phosphoinositide kinase, and diphosphoinositide kinase, as well as the absence of a specific phosphatidyl inositol synthesis inhibiting effect of glycogen.