Macroautophagy/autophagy failure with the accumulation of autophagosomes is an early neuropathological feature of Alzheimer disease (AD) that directly affects amyloid beta (Aβ) metabolism. Although loss of presenilin 1 function has been reported to impair lysosomal function and prevent autophagy flux, the detailed mechanism leading to autophagy dysfunction in AD remains to be elucidated. The resemblance between pathological hallmarks of AD and Niemann-Pick Type C disease, including endosome-lysosome abnormalities and impaired autophagy, suggests cholesterol accumulation as a common link. Using a mouse model of AD (APP-PSEN1-SREBF2 mice), expressing chimeric mouse-human amyloid precursor protein with the familial Alzheimer Swedish mutation (APP695swe) and mutant presenilin 1 (PSEN1-dE9), together with a dominant-positive, truncated and active form of SREBF2/SREBP2 (sterol regulatory element binding factor 2), we demonstrated that high brain cholesterol enhanced autophagosome formation, but disrupted its fusion with endosomal-lysosomal vesicles. The combination of these alterations resulted in impaired degradation of Aβ and endogenous MAPT (microtubule associated protein tau), and stimulated autophagy-dependent Aβ secretion. Exacerbated Aβ-induced oxidative stress in APP-PSEN1-SREBF2 mice, due to cholesterol-mediated depletion of mitochondrial glutathione/mGSH, is critical for autophagy induction. In agreement, in vivo mitochondrial GSH recovery with GSH ethyl ester, inhibited autophagosome synthesis by preventing the oxidative inhibition of ATG4B deconjugation activity exerted by Aβ. Moreover, cholesterol-enrichment within the endosomes-lysosomes modified the levels and membrane distribution of RAB7A and SNAP receptors (SNAREs), which affected its fusogenic ability. Accordingly, in vivo treatment with 2-hydroxypropyl-β-cyclodextrin completely rescued these alterations, making it a potential therapeutic tool for AD.