Genetic mutations in the tau gene on chromosome 17 are known to cause frontotemporal dementias. We have identified a novel silent mutation (S305S) in the tau gene in a subject without significant atrophy or cellular degeneration of the frontal and temporal cortices. Rather the cellular pathology was characteristic of progressive supranuclear palsy, with neurofibrillary tangles concentrating within the subcortical regions of the basal ganglia. Two affected family members presented with symptoms of dementia and later developed neurological deficits including abnormality of vertical gaze and extrapyramidal signs. The third presented with dystonia of the left arm and dysarthria, and later developed a supranuclear gaze palsy and falls. The mutation is located in exon 10 of the tau gene and forms part of a stem-loop structure at the 5' splice donor site. Although the mutation does not give rise to an amino acid change in the tau protein, functional exon-trapping experiments show that it results in a significant 4.8-fold increase in the splicing of exon 10, resulting in the presence of tau containing four microtubule-binding repeats. This study provides direct molecular evidence for a functional mutation that causes progressive supranuclear palsy pathology and demonstrates that mutations in the tau gene are pleiotropic.