Retinal degeneration and visual impairment are the first signs of juvenile neuronal ceroid lipofuscinosis caused by CLN3 mutations, followed by inevitable progression to blindness. We investigated retinal degeneration in Cln3Δex1-6 null mice, revealing classic ‘fingerprint’ lysosomal storage in the retinal pigment epithelium (RPE), replicating the human disease. The lysosomes contain mitochondrial F0-ATP synthase subunit c along with undigested membranes, indicating a reduced degradative capacity. Mature autophagosomes and basal phagolysosomes, the terminal degradative compartments of autophagy and phagocytosis, are also increased in Cln3Δex1-6 RPE, reflecting disruption to these key pathways that underpin the daily phagocytic turnover of photoreceptor outer segments (POS) required for maintenance of vision. The accumulated autophagosomes have post-lysosome fusion morphology, with undigested internal contents visible, while accumulated phagosomes are frequently docked to cathepsin D-positive lysosomes, without mixing of phagosomal and lysosomal contents. This suggests lysosome-processing defects affect both autophagy and phagocytosis, supported by evidence that phagosomes induced in Cln3Δex1-6-derived mouse embryonic fibroblasts have visibly disorganized membranes, unprocessed internal vesicles and membrane contents, in addition to reduced LAMP1 membrane recruitment. We propose that defective lysosomes in Cln3Δex1-6 RPE have a reduced degradative capacity that impairs the final steps of the intimately connected autophagic and phagocytic pathways that are responsible for degradation of POS. A build-up of degradative organellar by-products and decreased recycling of cellular materials is likely to disrupt processes vital to maintenance of vision by the RPE.