Homozygous mutations of granulin precursor (GRN) lead to neuronal ceroid lipofuscinosis1, a severe neurodevelopmental disease, in humans and neuroinflammation in mice2. Haploinsufficiency of GRN almost invariably causes frontotemporal dementia (FTD)3,4. The GRN locus produces progranulin (PGRN), a lysosomal precursor protein that is cleaved to granulin peptides5,6. Despite intensive investigation, the function of granulins and the reason why their absence causes neurodegeneration remain unclear. Here, we investigated PGRN function in lipid degradation, a major function of lysosomes. We show that PGRN-knockout human cells, PGRN-deficient murine brain, and frontal lobes of human brains from patients with GRN mutation-related FTD have increased levels of gangliosides, highly abundant sialic acid–containing glycosphingolipids (GSL) that are degraded in lysosomes. Probing how PGRN deficiency causes these changes, we found normal levels and activities of enzymes that catabolize gangliosides. However, levels of bis(monoacylglycero)phosphate (BMP), a lysosomal lipid required for ganglioside catabolism7, were markedly reduced in PGRN-deficient cells and patient brain tissues. These data indicate that granulins are required to maintain BMP levels, which regulate ganglioside catabolism, and that PGRN deficiency in lysosomes leads to gangliosidosis. This aberrant accumulation of gangliosides may contribute to neuroinflammation and neurodegeneration susceptibility.