Niemann-Pick type C (NPC) disease is an autosomal recessive disorder caused by mutations of NPC1 and NPC2 genes. Progressive neurodegeneration that accompanies NPC is fatal, but the underlying mechanisms are still poorly understood. In the present study, we characterized the association of autophagic-lysosomal dysfunction with cholesterol accumulation in Npc1^−/− mice during postnatal development. Brain levels of lysosomal cathepsin D were significantly higher in mutant than in wild-type mice. Increases in cathepsin D occurred first in neurons and later in astrocytes and microglia and were both spatially and temporally associated with intracellular cholesterol accumulation and neurodegeneration. Furthermore, levels of ubiquitinated proteins were higher in endosomal/lysosomal fractions of brains from Npc1^−/− mice than from wild-type mice. Immunoblotting results showed that levels of LC3-II were significantly higher in brains of mutant than wild-type mice. Combined LC3 immunofluorescence and filipin staining showed that LC3 accumulated within filipin-labeled cholesterol clusters inside Purkinje cells. Electron microscopic examination revealed the existence of autophagic vacuole-like structures and multivesicles in brains from Npc1^−/− mice. These results provide strong evidence that cholesterol accumulation-induced changes in autophagy-lysosome function are closely associated with neurodegeneration in NPC.