Friedreich ataxia, a neurodegenerative disorder resulting from frataxin deficiency, is thought to involve progressive cellular damage from oxidative stress. In Drosophila larvae with reduced frataxin expression (DfhIR), we evaluated possible mechanisms of cellular neuropathology by quantifying mitochondrial axonal transport, membrane potential (MMP), and reactive oxygen species (ROS) production in the DfhIR versus wild-type nervous system throughout development. Although dying-back neuropathy in DfhIR larvae did not occur until late third instar, reduced MMP was already apparent at second instar in the cell bodies, axons and neuromuscular junctions (NMJs) of segmental nerves. Defects in axonal transport of mitochondria appeared late in development in distal nerve of DfhIR larvae, with retrograde movement preferentially affected. As a result, by late third instar the neuromuscular junctions (NMJs) of DfhIR larvae accumulated a higher density of mitochondria, many of which were depolarized. Notably, increased ROS production was not detected in any neuronal region or developmental stage in DfhIR larvae. However, when challenged with antimycin A, neurons did respond with a larger increase in ROS. We propose that pathology in the frataxin-deficient nervous system involves decreased MMP and ATP production followed by failures of mitochondrial transport and NMJ function.