The human apolipoprotein E4 isoform (APOE4) is the strongest genetic risk factor for late-onset Alzheimer's disease (AD), and lysosomal dysfunction has been implicated in AD pathogenesis. We found, by examining cells stably expressing each APOE isoform, that APOE4 increases lysosomal trafficking, accumulates in enlarged lysosomes and late endosomes, alters autophagic flux and the abundance of autophagy proteins and lipid droplets, and alters the proteomic contents of lysosomes following internalization. We investigated APOE-related lysosomal trafficking further in cell culture, and found that APOE from the post-Golgi compartment is degraded through autophagy. We found that this autophagic process requires the lysosomal membrane protein LAMP2 in immortalized neuron-like and hepatic cells, and in mouse brain tissue. Several macroautophagy-associated proteins were also required for autophagic degradation and internalization of APOE in hepatic cells. The dysregulated autophagic flux and lysosomal trafficking of APOE4 that we observed suggest a possible novel mechanism that might contribute to AD pathogenesis. This article has an associated First Person interview with the first author of the paper.