Human retrotransposon insertions are often associated with diseases. In the case of the neurodegenerative X-Linked Dystonia-Parkinsonism (XDP) disease, a human-specific SINE-VNTR-Alu subfamily F (SVA_F) retrotransposon was inserted in intron 32 of the TAF1 gene. Here, we genomically rewrote a portion of the mouse Taf1 allele with the corresponding 78-kb human TAF1 allele derived from an XDP patient. In mouse embryonic stem cells (mESCs), the presence of the intronic SVAs, rather than the hybrid gene structure reduces hyTAF1 levels. This leads to transcriptional downregulation of genes with TATA box enriched in their promoters, and triggering apoptosis. Chromatin and transcriptome profiling revealed that intronic SVAs are actively transcribed, forming barriers that likely impede transcription elongation. In mice, neuronal lineage TAF1 humanization resulted lethality of male progeny within two months. XDP male mice had severe atrophy centered on the striatum, the same affected brain region in XDP patients. We further detected aberrantly spliced and prematurely terminated hyTAF1 transcripts in the striata of XDP mice and in postmortem XDP human brains. Lastly, CRISPRa-mediated activation of hyTAF1 restored mESC viability, suggesting boosting TAF1 transcription as a therapeutic approach.