Updated project metadata. Recent developments in genome sequencing have expanded the knowledge of genetic factors associated with late-onset Alzheimer’s disease (AD). Among them, genetic variant e4 of the APOE gene (ApoE4) confers the greatest disease risk. Dysregulated glucose metabolism is an early pathological feature of AD. Using isogenic ApoE3 and ApoE4 astrocytes derived from human-induced pluripotent stem cells, we find that ApoE4 increases glycolytic activity but impairs mitochondrial respiration in astrocytes. Ultrastructural and autophagic flux analyses show that ApoE4-induced cholesterol accumulation impairs lysosome-dependent removal of damaged mitochondria. Acute treatment with cholesterol-depleting agents restores autophagic activity, mitochondrial dynamics, and associated proteomes, and extended treatment rescues mitochondrial respiration in ApoE4 astrocytes. Taken together, our study provides a direct link between ApoE4-induced lysosomal cholesterol accumulation and abnormal oxidative phosphorylation.