Over half of adults are seropositive for JC polyomavirus (JCV), but rare individuals develop progressive multifocal leukoencephalopathy (PML), a demyelinating JCV infection of the central nervous system. Previously, PML was primarily seen in immunosuppressed patients with AIDS or certain cancers, but it has recently emerged as a drug safety issue through its association with diverse immunomodulatory therapies. To better understand the relationship between the JCV life cycle and PML pathology, we studied autopsy brain tissue from a 70-year-old psoriasis patient on the integrin alpha-L inhibitor efalizumab following a ~2 month clinical course of PML. Sequence analysis of lesional brain tissue identified PML-associated viral mutations in regulatory (non-coding control region) DNA, capsid protein VP1, and the regulatory agnoprotein, as well as 9 novel mutations in capsid protein VP2, indicating rampant viral evolution. Nine samples, including three gross PML lesions and normal-appearing adjacent tissues, were characterized by histopathology and subject to quantitative genomic, proteomic, and molecular localization analyses. We observed a striking correlation between the spatial extent of demyelination, axonal destruction, and dispersion of JCV along white matter myelin sheath. Our observations in this case, as well as in a case of PML-like disease in an immunocompromised rhesus macaque, suggest that long-range spread of polyomavirus and axonal destruction in PML might involve extracellular association between virus and the white matter myelin sheath.