Melanin, the pigment in hair, skin, eyes, and feathers, protects external tissue from damage by UV light. In contrast, neuromelanin (NM) is found in deep brain regions, specifically in loci that degenerate in Parkinson's disease. Although this distribution suggests a role for NM in Parkinson's disease neurodegeneration, the biosynthesis and function of NM have eluded characterization because of lack of an experimental system. We induced NM in rat substantia nigra and PC12 cell cultures by exposure to l-dihydroxyphenylalanine, which is rapidly converted to dopamine (DA) in the cytosol. This pigment was identical to human NM as assessed by paramagnetic resonance and was localized in double membrane autophagic vacuoles identical to NM granules of human substantia nigra. NM synthesis was abolished by adenoviral-mediated overexpression of the synaptic vesicle catecholamine transporter VMAT2, which decreases cytosolic DA by increasing vesicular accumulation of neurotransmitter. The NM is in a stable complex with ferric iron, and NM synthesis was inhibited by the iron chelator desferrioxamine, indicating that cytosolic DA and dihydroxyphenylalanine are oxidized by iron-mediated catalysis to membrane-impermeant quinones and semiquinones. NM synthesis thus results from excess cytosolic catecholamines not accumulated into synaptic vesicles. The permanent accumulation of excess catechols, quinones, and catechol adducts into a membrane-impermeant substance trapped in organelles may provide an antioxidant mechanism for catecholamine neurons. However, NM in organelles associated with secretory pathways may interfere with signaling, as it delays stimulated neurite outgrowth in PC12 cells.