Lysosomes are the central degradative organelle of mammalian cells and have emerged as major intersections of cellular metabolite flux. Macromolecules derived from dietary and intracellular sources are delivered to the acidic lysosomal lumen where they are subjected to degradation by acid hydrolases. Lipids derived from lipoproteins, autophagy cargo, or autophagosomal membranes themselves constitute major lysosomal substrates. Dysregulation of lysosomal lipid processing, defective export of lipid catabolites, and lysosomal membrane permeabilization underly diseases ranging from neurodegeneration to metabolic syndromes and lysosomal storage disorders. Mammalian cells are equipped with sophisticated homeostatic control mechanisms that protect the lysosomal limiting membrane from excessive damage, prevent the spillage of luminal hydrolases into the cytoplasm, and preserve the lysosomal membrane composition in the face of constant fusion with heterotypic organelles such as endosomes and autophagosomes. In this review we discuss the molecular mechanisms that govern lysosomal lipid homeostasis and, thereby, lysosome function in health and disease.