More than 120 mutations in the Myelin Protein Zero gene (MPZ, P0) cause various forms of hereditary neuropathy. Two human mutations encoding either P0S63C or P0S63del have been shown to cause demyelination in mice through different gain of function pathomechanisms. P0S63del, for example, is retained in the endoplasmic reticulum (ER) and elicits a pathogenetic unfolded protein response (UPR). As P0 likely forms oligomers, another gain of abnormal function could include a dominant-negative interaction between P0S63del and normal P0 (P0wt). To test this idea, we generated a transgenic mouse that expressed a form of P0wt with a myc epitope tag at the C terminus (P0ct-myc). We show that P0ct-myc is trafficked and functions like P0wt, thus providing a new tool to study P0 in vivo. In mice that express both P0ct-myc and P0S63del, P0S63del specifically delays the transit of P0ct-myc through the ER and reduces the level of P0wt in the myelin sheath by half—a level previously shown to cause demyelination in mice and humans. Surprisingly, P0ct-myc does not co-immunoprecipitate with P0S63del, suggesting an indirect interaction. Thus, P0S63del causes not only a UPR-related toxic mechanism, but also a dominant-negative effect on P0wt that probably contributes to demyelinating neuropathy.