**Core Concept**
Negri bodies are eosinophilic, intracytoplasmic inclusions found in the neurons of individuals infected with rabies virus, a member of the Lyssavirus genus. They are a hallmark of viral encephalitis caused by this pathogen.

**Why the Correct Answer is Right**
Negri bodies are formed when the rabies virus infects the neurons of the central nervous system (CNS), specifically the hippocampus, cerebellum, and cerebral cortex. The viral nucleocapsid is aggregated within the endoplasmic reticulum and transported to the cytoplasm, where it accumulates and forms these characteristic inclusions. These inclusions disrupt normal neuronal function, leading to the clinical manifestations of rabies.

**Why Each Wrong Option is Incorrect**
**Option A:** This option is incorrect as Negri bodies are not typically found in the peripheral nervous system (PNS).
**Option B:** This option is incorrect as the presence of Negri bodies is not diagnostic of Japanese encephalitis, which is caused by a different virus.
**Option C:** This option is incorrect as the cerebellum is one of the areas where Negri bodies can be found, but it is not the only or primary location.

**Clinical Pearl / High-Yield Fact**
Negri bodies are a critical diagnostic feature of rabies, and their presence in a patient with a history of exposure to the virus is a strong indication of the diagnosis. Remember that Negri bodies are most commonly found in the hippocampus and cerebellum.

**Correct Answer:** C.