Age-related macular degeneration (AMD) is a prevalent multifactorial disorder of the central retina^,,. Genetic variants at two chromosomal loci, 1q31 and 10q26, confer major disease risks, together accounting for more than 50% of AMD pathology^,,,,,. Signals at 10q26 center over two nearby genes, ARMS2 (age-related maculopathy susceptibility 2, also known as LOC387715)^, and HTRA1 (high-temperature requirement factor A1)^,, suggesting two equally probable candidates. Here we show that a deletion-insertion polymorphism in ARMS2 (NM_001099667.1:c.^*372_815del443ins54) is strongly associated with AMD, directly affecting the transcript by removing the polyadenylation signal and inserting a 54-bp element known to mediate rapid mRNA turnover. As a consequence, expression of ARMS2 in homozygous carriers of the indel variant is not detectable. Confirming previous findings, we demonstrate a mitochondrial association of the normal protein and further define its retinal localization to the ellipsoid region of the photoreceptors. Our data suggest that ARMS2 has a key role in AMD, possibly through mitochondria-related pathways.