Olanzapine is a second-generation antipsychotic (AP) drug commonly prescribed for the treatment of schizophrenia. Recently, olanzapine has been found to cause brain tissue volume loss in rodent and primate studies; however, the underlying mechanism remains unknown. Abnormal autophagy and oxidative stress have been implicated to have a role in AP-induced neurodegeneration, while N-acetylcysteine (NAC) is a potent antioxidant, shown to be beneficial in the treatment of schizophrenia. Here, we investigate the role of olanzapine and NAC on cell viability, oxidative stress, mitochondrial mass and mitophagy in hypothalamic cells. Firstly, cell viability was assessed in mHypoA-59 and mHypoA NPY/GFP cells using an MTS assay and flow cytometric analyses. Olanzapine treated mHypoA-59 cells were then assessed for mitophagy markers and oxidative stress; including quantification of lysosomes, autophagosomes, LC3B-II, p62, superoxide anion (O2–) and mitochondrial mass. NAC (10 mM) was used to reverse the effects of olanzapine (100 µM) on O2−, mitochondrial mass and LC3B-II. We found that olanzapine significantly impacted cell viability in mHypoA-59 hypothalamic cells in a dose and time-dependent manner. Olanzapine inhibited mitophagy, instigated oxidative stress and prompted mitochondrial abnormalities. NAC was able to mitigate olanzapine-induced effects. These findings suggest that high doses of olanzapine may cause neurotoxicity of hypothalamic neurons via increased production of reactive oxygen species (ROS), mitochondrial damage and mitophagy inhibition. This could in part explain data suggesting that APs may reduce brain volume.