Charcot-Marie-Tooth (CMT) disease is an inherited neurological disorder. Mutations in the small integral membrane protein of the lysosome/late endosome (SIMPLE) account for the rare autosomal-dominant demyelination in CMT1C patients. Understanding the molecular basis of CMT1C pathogenesis is impeded, in part, by perplexity about the role of SIMPLE, which is expressed in multiple cell types. Here we show that SIMPLE resides within the intraluminal vesicles of multivesicular bodies (MVBs) and inside exosomes, which are nanovesicles secreted extracellularly. Targeting of SIMPLE to exosomes is modulated by positive and negative regulatory motifs. We also find that expression of SIMPLE increases the number of exosomes and secretion of exosome proteins. We engineer a point mutation on the SIMPLE allele and generate a physiological mouse model that expresses CMT1C-mutated SIMPLE at the endogenous level. We find that CMT1C mouse primary embryonic fibroblasts show decreased number of exosomes and reduced secretion of exosome proteins, in part due to improper formation of MVBs. CMT1C patient B cells and CMT1C mouse primary Schwann cells show similar defects. Together the data indicate that SIMPLE regulates the production of exosomes by modulating the formation of MVBs. Dysregulated endosomal trafficking and changes in the landscape of exosome-mediated intercellular communications may place an overwhelming burden on the nervous system and account for CMT1C molecular pathogenesis.