Khalim's Brain is one of the items needed to create the flail, Khalim's Will as part of the Khalim's Will quest.
It can be found on level 3 of the Flayer Dungeon (not to be confused with the Swampy Pit, which is also in the Flayer Jungle).
Act I — Scroll of Inifuss • Horadric Malus
Act II — Horadric Scroll • Book of Skill • Horadric Cube • Staff of Kings • Amulet of the Viper • Horadric Staff
Act III — Jade Figurine • Golden Bird • Potion of Life • The Gidbinn • Lam Esen's Tome • Khalim's Eye • Khalim's Brain • Khalim's Heart • Khalim's Flail • Khalim's Will
Act IV — Mephisto's Soulstone • Hell Forge Hammer
Act V — Malah's Potion • Scroll of Resistance
Special — Wirt's Leg (The Secret Cow Level) • Stone of Jordan (Über Diablo)
Pandemonium Event — Key of Terror • Key of Hate • Key of Destruction • Mephisto's Brain • Diablo's Horn • Baal's Eye