Machado-Joseph disease (MJD), also known as spinocerebellar ataxia type 3 (SCA3), is the most common inherited spinocerebellar ataxia and one of many polyglutamine neurodegenerative diseases. In MJD, a CAG repeat expansion encodes an abnormally long polyglutamine (polyQ) tract in the disease protein, ATXN3. Here we review MJD, focusing primarily on the function and dysfunction of ATXN3 and on advances toward potential therapies. ATXN3 is a deubiquitinating enzyme (DUB) whose highly specialized properties suggest that it participates in ubiquitin-dependent proteostasis. By virtue of its interactions with VCP, various ubiquitin ligases and other ubiquitin-linked proteins, ATXN3 may help regulate the stability or activity of many proteins in diverse cellular pathways implicated in proteotoxic stress response, aging, and cell differentiation. Expansion of the polyQ tract in ATXN3 is thought to promote an altered conformation in the protein, leading to changes in interactions with native partners and to the formation of insoluble aggregates. The development of a wide range of cellular and animal models of MJD has been crucial to the emerging understanding of ATXN3 dysfunction upon polyQ expansion. Despite many advances, however, the principal molecular mechanisms by which mutant ATXN3 elicits neurotoxicity remain elusive. In a chronic degenerative disease like MJD, it is conceivable that mutant ATXN3 triggers multiple, interconnected pathogenic cascades that precipitate cellular dysfunction and eventual cell death. A better understanding of these complex molecular mechanisms will be important as scientists and clinicians begin to focus on developing effective therapies for this incurable, fatal disorder.