Protein cleavage is a common feature in human neurodegenerative disease. Ataxin-3 protein with an expanded polyglutamine (polyQ) repeat causes spinocerebellar ataxia type-3 (SCA3), also called Machado-Joseph disease, and is cleaved in mammalian cells, transgenic mice and SCA3 patient brain tissue. However, the pathological significance of Ataxin-3 cleavage has not been carefully examined. To gain insight into the significance of Ataxin-3 cleavage, we developed a Drosophila SL2 cell-based model as well as transgenic fly models. Our data indicate that Ataxin-3 protein cleavage is conserved in the fly and may be caspase-dependent as reported previously. Importantly, comparison of flies expressing either wild-type or caspase-site mutant proteins indicates that Ataxin-3 cleavage enhances neuronal loss in vivo. This genetic in vivo confirmation of the pathological role of Ataxin-3 cleavage indicates that therapies targeting Ataxin-3 cleavage might slow disease progression in SCA3 patients.