Frontotemporal degeneration (FTD) and Alzheimer's disease (AD) are two of the most common causes of dementia, share overlapping pathologies, are huge health burdens, yet are incurable. This proposal focuses on elucidating how loss of progranulin (PGRN) causes lysosome dysfunction and lipid dysregulation associated with FTD and AD. PGRN is a secreted protein composed of 7.5 tandem domains called granulins. Genetic variants and loss-of-function mutations in the progranulin gene (GRN), reduce PGRN and increase the risk of AD and cause FTD, respectively. Despite its importance in brain health, the exact function of PGRN and granulins are unknown. We have discovered that PGRN is cleaved into 6 kDa granulin proteins in the lysosome. Work from our lab and others support the idea that PGRN serves as a precursor to lysosomal granulins, which mediate lysosome homeostasis and loss of granulins causes impaired lysosome function. However, the function of granulins in the lysosome remains elusive. Based on our published work and new data, we propose that loss of granulins impair lysosomal lipid metabolism, which is the primary defect that ultimately leads to neurodegeneration. Integrated analysis of the Grn−/− mouse metabolome and lipidome revealed early accumulation of glycosphingolipids, phospholipids, and monoglycerides. Systems biology analysis of these data identify dysregulated lysosomal lipid flux as a primary defect in Grn−/− tissue. Further, we pinpoint decreased activity of a novel lysosomal hydrolase as a key factor. Based on these data, we hypothesize that granulins bind and modulate the activity of lysosomal lipid hydrolases to prevent lipid accumulation and neurodegeneration. In this project we will 1) determine the global and lysosome-specific molecular defects caused by PGRN deficiency in human induced pluripotent stem cell (iPSC)-derived neurons and microglia, 2) test the hypothesis that granulins modulate activity of lipid hydrolases in the lysosomal lumen, and 3) define how PGRN deficiency alters the metabolome and lipidome in mice and humans. Completion of these studies will provide novel systems-level insight into the function of granulins in the lysosome. The reagents and data we generate will be widely shared to advance our field's understanding of PGRN function. Our team is ideally suited to complete the proposed studies, which critically evaluate the novel hypothesis that granulins facilitate metabolism of distinct lipids in the lysosome through activation of novel lipid hydrolases to prevent lipid accumulation and neurodegeneration. In doing so, we will uncover why decreased levels of PGRN and granulins cause FTD, AD, and reveal new targets to treat diseases caused by PGRN deficiency.