Cerebellar ataxia, areflexia, pes cavus, optic atrophy and sensorineural hearing impairment (CAPOS) is a rare clinically distinct syndrome caused by a single dominant missense mutation, c.2452G>A, p.Glu818Lys, in ATP1A3, encoding the neuron-specific alpha subunit of the Na+/K+-ATPase α3. Allelic mutations cause the neurological diseases rapid dystonia Parkinsonism and alternating hemiplegia of childhood, disorders which do not encompass hearing or visual impairment. We present detailed clinical phenotypic information in 18 genetically confirmed patients from 11 families (10 previously unreported) from Denmark, Sweden, UK and Germany indicating a specific type of hearing impairment—auditory neuropathy (AN). All patients were clinically suspected of CAPOS and had hearing problems. In this retrospective analysis of audiological data, we show for the first time that cochlear outer hair cell activity was preserved as shown by the presence of otoacoustic emissions and cochlear microphonic potentials, but the auditory brainstem responses were grossly abnormal, likely reflecting neural dyssynchrony. Poor speech perception was observed, especially in noise, which was beyond the hearing level obtained in the pure tone audiograms in several of the patients presented here. Molecular modelling and in vitro electrophysiological studies of the specific CAPOS mutation were performed. Heterologous expression studies of α3 with the p.Glu818Lys mutation affects sodium binding to, and release from, the sodium-specific site in the pump, the third ion-binding site. Molecular dynamics simulations confirm that the structure of the C-terminal region is affected. In conclusion, we demonstrate for the first time evidence for auditory neuropathy in CAPOS syndrome, which may reflect impaired propagation of electrical impulses along the spiral ganglion neurons. This has implications for diagnosis and patient management. Auditory neuropathy is difficult to treat with conventional hearing aids, but preliminary improvement in speech perception in some patients suggests that cochlear implantation may be effective in CAPOS patients.