Metformin is the most prescribed anti-diabetic medicine, and has also been shown to have other various benefits, such as anti-aging and anti-cancer effects. For clinical doses of metformin, it is known that AMPK plays a major role; however, the direct molecular target of metformin remains unclear. Here, we found that clinically relevant concentrations of metformin inhibits the lysosomal proton pump (v-ATPase), which has been shown to be a central node for AMPK activation upon glucose starvation. We synthesised a photoactive metformin probe, and identified that PEN2, a subunit of γ-secretases, is a binding partner of metformin with KD at micromolar levels. Metformin-bound PEN2 then forms a complex with ATP6AP1, a subunit of the v-ATPase, leading to inhibition of v-ATPase and activation of AMPK without affecting cellular AMP levels. Knockout of PEN2, or re-introduction of a PEN2 mutant that fails to bind ATP6AP1, blunts AMPK activation. In vivo, liver-specific knockout of PEN2 abolishes metformin-mediated reduction of hepatic fat content, and intestine-specific knockout of PEN2 impairs its glucose-lowering effects. Furthermore, knockdown of PEN2 in Caenorhabditis elegans abrogates metformin-induced extension of lifespan. Together, these findings reveal that metformin binds to PEN2, initiating a signalling route that intersects, via ATP6AP1, the lysosomal glucose-sensing pathway for AMPK activation, ensuring that metformin manifests therapeutic benefits without significant drawbacks in patients.