DNA transposable elements and transposase-derived genes are present in most living organisms, including vertebrates, but their function is largely unknown. PiggyBac Transposable Element Derived 5 (PGBD5) is an evolutionarily conserved vertebrate DNA transposase-derived gene with retained nuclease activity in cells. Vertebrate brain development is known to be associated with prominent neuronal cell death and DNA breaks, but their causes and functions are not well understood. Here, we show that PGBD5 contributes to normal brain development in mice and humans, where its deficiency causes disorder of intellectual disability, movement and seizures. In mice, Pgbd5 is required for the developmental induction of post-mitotic DNA breaks and recurrent somatic genome rearrangements in neurons. Together, these studies nominate PGBD5 as the long-hypothesized neuronal DNA nuclease required for brain function in mammals.