Sphingolipidoses are inherited diseases belonging to the class of lysosomal storage diseases (LSDs), which are characterized by the accumulation of indigestible material in the lysosome caused by specific defects in the lysosomal degradation machinery. While some LSDs can be efficiently treated by enzyme replacement therapy (ERT), this is not possible if the nervous system is affected due to the presence of the blood-brain barrier. Sphingolipidoses in particular often present as severe, untreatable forms of LSDs with massive sphingolipid and membrane accumulation in lysosomes, neurodegeneration and very short life expectancy. The digestion of intralumenal membranes within lysosomes is facilitated by lysosomal sphingolipid activator proteins (saposins), which are cleaved from a prosaposin precursor. Prosaposin mutations cause some of the severest forms of sphingolipidoses, and are associated with perinatal lethality in mice, hampering studies on disease progression. We identify the Drosophila prosaposin orthologue Saposin-related (Sap-r) as a key regulator of lysosomal lipid homeostasis in the fly. Its mutation leads to a typical spingolipidosis phenotype with an enlarged endolysosomal compartment and sphingolipid accumulation as shown by mass spectrometry and thin layer chromatography. Sap-r mutants show reduced viability with ∼50% survival to adulthood, allowing us to study progressive neurodegeneration and analyze their lipid profile in young and aged flies. Additionally, we observe a defect in sterol homeostasis with local sterol depletion at the plasma membrane. Furthermore, we find that autophagy is increased, resulting in the accumulation of mitochondria in lysosomes, concomitant with increased oxidative stress. Together, we establish Drosophila Sap-r mutants as a lysosomal storage disease model suitable for studying the age-dependent progression of lysosomal dysfunction associated with lipid accumulation and the resulting pathological signaling events.