Mitochondrial dysfunction is a common cause of peripheral neuropathy. Much effort has been devoted to examining the role played by neuronal/axonal mitochondria, but how mitochondrial deficits in peripheral nerve glia (Schwann cells [SCs]) contribute to peripheral nerve diseases remains unclear. Here, we investigate a mouse model of peripheral neuropathy secondary to SC mitochondrial dysfunction (Tfam-SCKOs). We show that disruption of SC mitochondria activates a maladaptive integrated stress response (ISR) through the actions of heme-regulated inhibitor (HRI) kinase, and causes a shift in lipid metabolism away from fatty acid synthesis toward oxidation. These alterations in SC lipid metabolism result in depletion of important myelin lipid components as well as in accumulation of acylcarnitines (ACs), an intermediate of fatty acid β-oxidation. Importantly, we show that ACs are released from SCs and induce axonal degeneration. A maladaptive ISR as well as altered SC lipid metabolism are thus underlying pathological mechanisms in mitochondria-related peripheral neuropathies.