Mitochondrial dysfunction has been suggested to contribute to neurodegenerative diseases, including Alzheimer and Parkinson disease. Cells respond to changes in the functional state of mitochondria via retrograde signaling pathways from the mitochondria to the nucleus, but little is known about retrograde signaling in the nervous system. We have recently shown that inhibition of retrograde signaling reduces the impact of neuronal mitochondrial dysfunction. We performed a study designed to characterize the mitochondrial retrograde signaling pathway in the Drosophila nervous system. Using several different models we found that neuronal specific mitochondrial dysfunction results in defects in synapse development and neuronal function. Moreover, we identified the Drosophila hypoxia inducible factor α (HIFα) ortholog Sima as a key neuronal transcriptional regulator. Knock-down of sima restores function in several Drosophila models of mitochondrial dysfunction, including models of human disease. Here we discuss these findings and speculate on the potential benefits of inhibition of retrograde signaling. We also describe how our results relate to other studies of mitochondrial retrograde signaling and the potential therapeutic applications of these discoveries.