The RNA-mediated disease model for myotonic dystrophy (DM) proposes that microsatellite C(C)TG expansions express toxic RNAs that disrupt splicing regulation by altering MBNL1 and CELF1 activities. While this model explains DM manifestations in muscle, less is known about the effects of C(C)UG expression on the brain. Here, we report that Mbnl2 knockout mice develop several DM-associated central nervous system (CNS) features including abnormal REM sleep propensity and deficits in spatial memory. Mbnl2 is prominently expressed in the hippocampus and Mbnl2 knockouts show a decrease in NMDA receptor (NMDAR) synaptic transmission and impaired hippocampal synaptic plasticity. While Mbnl2 loss did not significantly alter target transcript levels in the hippocampus, misregulated splicing of hundreds of exons was detected using splicing microarrays, RNA-seq, and HITS-CLIP. Importantly, the majority of the Mbnl2-regulated exons examined were similarly misregulated in DM. We propose that major pathological features of the DM brain result from disruption of the MBNL2-mediated developmental splicing program.