The manchette is a transient and unique structure present in elongating spermatids and required for proper differentiation of the germ cells during spermatogenesis. Previous work indicated that the MEIG1/PACRG complex locates in the manchette and is involved in the transport of cargos, such as SPAG16L, to build the sperm flagellum. Here, using co-immunoprecipitation and pull-down approaches in various cell systems, we established that DNALI1, an axonemal component originally cloned from <i>Chlamydomonas reinhardtii</i>, recruits and stabilizes PACRG and we confirm in vivo, the co-localization of DNALI1 and PACRG in the manchette by immunofluorescence of elongating murine spermatids. We next generated mice with a specific deficiency of DNALI1 in male germ cells, and observed a dramatic reduction of the sperm cells, which results in male infertility. In addition, we observed that the majority of the sperm cells exhibited abnormal morphology including misshapen heads, bent tails, enlarged midpiece, discontinuous accessory structure, emphasizing the importance of DNALI1 in sperm differentiation. Examination of testis histology confirmed impaired spermiogenesis in the mutant mice. Importantly, while testicular levels of MEIG1, PACRG, and SPAG16L proteins were unchanged in the <i>Dnali1</i> mutant mice, their localization within the manchette was greatly affected, indicating that DNALI1 is required for the formation of the MEIG1/PACRG complex within the manchette. Interestingly, in contrast to MEIG1 and PACRG-deficient mice, the DNALI1-deficient mice also showed impaired sperm spermiation/individualization, suggesting additional functions beyond its involvement in the manchette structure. Overall, our work identifies DNALI1 as a protein required for sperm development.