p97 is a highly abundant, homohexameric AAA+ ATPase that performs a variety of essential cellular functions. Characterized as a ubiquitin-selective chaperone, p97 recognizes proteins conjugated to K48-linked polyubiquitin chains and promotes their removal from chromatin and other molecular complexes. Changes in p97 expression or activity are associated with the development of cancer and several related neurodegenerative disorders. Although pathogenic p97 mutations cluster in and around p97's ATPase domains, mutant proteins display normal or elevated ATPase activity. Here, we show that one of the most common p97 mutations (R155C) retains ATPase activity, but is functionally defective. p97-R155C can be recruited to ubiquitinated substrates on chromatin, but is unable to promote substrate removal. As a result, p97-R155C acts as a dominant negative, blocking protein extraction by a similar mechanism to that observed when p97's ATPase activity is inhibited or inactivated. However, unlike ATPase-deficient proteins, p97-R155C consumes excess ATP, which can hinder high-energy processes. Together, our results shed new insight into how pathogenic mutations in p97 alter its cellular function, with implications for understanding the etiology and treatment of p97-associated diseases.