Lysosomes promote cellular homeostasis through macromolecular hydrolysis within their lumen and metabolic signaling by the mTORC1 kinase on their limiting membranes. Both hydrolytic and signaling functions require precise regulation of lysosomal cholesterol content. In Niemann-Pick type C (NPC), loss of the cholesterol exporter, NPC1, causes cholesterol accumulation within lysosomes, leading to mTORC1 hyperactivation, disrupted mitochondrial function, and neurodegeneration. The compositional and functional alterations in NPC lysosomes and nature of aberrant cholesterol-mTORC1 signaling contribution to organelle pathogenesis are not understood. Through proteomic profiling of NPC lysosomes, we find pronounced proteolytic impairment compounded with hydrolase depletion, enhanced membrane damage, and defective mitophagy. Genetic and pharmacologic mTORC1 inhibition restores lysosomal proteolysis without correcting cholesterol storage, implicating aberrant mTORC1 as a pathogenic driver downstream of cholesterol accumulation. Consistently, mTORC1 inhibition ameliorates mitochondrial dysfunction in a neuronal model of NPC. Thus, cholesterol-mTORC1 signaling controls organelle homeostasis and is a targetable pathway in NPC.