The E4 variant of APOE is the primary risk factor for Alzheimer’s Disease. While APOE is primarily expressed by astrocytes, early AD pathology appears predominantly in neurons, including endosomal abnormalities and mitochondrial dysfunction. Lysosomes are poised at the convergence point between these distinct features, orchestrating clearance of defective mitochondria. Here we find that Neuro-2a cells expressing apoE4 exhibit lysosomal alkalinization, reduced lysosomal proteolysis, and reduced mitophagy as compared to apoE3-expressing cells. To identify factors that may regulate this lysosomal dysfunction we performed quantitative proteomic profiling of lysosomes. This revealed that apoE4 expression results in the depletion of Lgals3bp and the accumulation of Tmed5 in both Neuro-2a cells and postmitotic human neurons, as compared to apoE3. Modulation of expression of both proteins was found to regulate lysosomal function, with knockdown of Tmed5 in apoE4 cells rescuing lysosomal alkalinization, while knockdown of Lgals3bp in apoE3 cells promoted lysosomal alkalinization and reduced lysosomal density. Taken together, our work reveals that the apoE4 allele exerts gain-of-toxicity by alkalinizing the lysosomal lumen, and pinpoints lysosomal Tmed5 accumulation and Lgals3bp depletion as apoE4-associated drivers for this phenotype.