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The endolysosomal system not only is an integral part of the cellular catabolic machinery that processes and recycles nutrients for synthesis of biomaterials, but also acts as signaling hub to sense and coordinate the energy state of cells with growth and differentiation. Lysosomal dysfunction adversely influences vesicular transport-dependent macromolecular degradation and thus causes serious problems for human health. In mammalian cells, loss of the lysosome associated membrane proteins LAMP1/2 strongly impacts autophagy and cholesterol trafficking. Here we show that the previously uncharacterizedDrosophilaLamp1 is abona fidehomolog of vertebrate LAMP1/2. Surprisingly and in contrast toLamp1/2double mutant mice,DrosophilaLamp1 is not required for viability or autophagy, suggesting that autophagy defects inLamp1/2mutants may have indirect causes. However, Lamp1 deficiency results in an expansion of the acidic compartment in flies. Furthermore, we find thatLamp1mutant larvae have defects in lipid metabolism as they show elevated levels of sterols and diacylglycerols (DAGs). Since DAGs are the main lipid species used for transport though the hemolymph (blood) in insects, our results indicate broader functions of Lamp1 in lipid transport. Our findings makeDrosophilaan ideal model to study the role of LAMP proteins in lipid assimilation without the confounding effects of their storage and without interfering with autophagic processes.