Loss of function of galactosylceramidase lysosomal activity causes demyelination and vulnerability of various neuronal populations in Krabbe disease. Psychosine, a lipid-raft-associated sphingolipid that accumulates in this disease, is thought to trigger these abnormalities. Myelin-free in vitro analyses showed that psychosine inhibited fast axonal transport through the activation of axonal PP1 and GSK3β in the axon. Abnormal levels of activated GSK3β and abnormally phosphorylated kinesin light chains were found in nerve samples from a mouse model of Krabbe disease. Administration of GSK3β inhibitors significantly ameliorated transport defects in vitro and in vivo in peripheral axons of the mutant mouse. This study identifies psychosine as a pathogenic sphingolipid able to block fast axonal transport and is the first to provide a molecular mechanism underlying dying-back degeneration in this genetic leukodystrophy.