Progressive accumulation of the amyloid β protein in extracellular plaques is a neuropathological hallmark of Alzheimer disease. Amyloid β is generated during sequential cleavage of the amyloid precursor protein (APP) by β- and γ-secretases. In addition to the proteolytic processing by secretases, APP is also metabolized by lysosomal proteases. Here, we show that accumulation of intracellular sphingosine-1-phosphate (S1P) impairs the metabolism of APP. Cells lacking functional S1P-lyase, which degrades intracellular S1P, strongly accumulate full-length APP and its potentially amyloidogenic C-terminal fragments (CTFs) as compared with cells expressing the functional enzyme. By cell biological and biochemical methods, we demonstrate that intracellular inhibition of S1P-lyase impairs the degradation of APP and CTFs in lysosomal compartments and also decreases the activity of γ-secretase. Interestingly, the strong accumulation of APP and CTFs in S1P-lyase-deficient cells was reversed by selective mobilization of Ca(2+) from the endoplasmic reticulum or lysosomes. Intracellular accumulation of S1P also impairs maturation of cathepsin D and degradation of Lamp-2, indicating a general impairment of lysosomal activity. Together, these data demonstrate that S1P-lyase plays a critical role in the regulation of lysosomal activity and the metabolism of APP.