Cathepsin D is an aspartyl protease that plays a crucial role in normal cellular functions and in a variety of neurodegenerative disorders, including Niemann-Pick type C (NPC) disease, which is characterized by intracellular accumulation of cholesterol and glycosphingolipids in many tissues, including the brain. There is evidence that the level and activity of cathepsin D increased markedly in vulnerable neurons in NPC pathology, but its involvement in neurodegeneration remains unclear. In the present study, using mouse hippocampal cultured neurons, we evaluated the significance of cathepsin D in toxicity induced by U18666A, a class II amphiphile, which triggers cell death by impairing the trafficking of cholesterol, as observed in NPC pathology. Our results showed that U18666A-mediated toxicity is accompanied by an increase in cathepsin D mRNA and enzyme activity but a decrease in the total peptide content. The cytosolic level of cathepsin D, on the other hand, was increased along with cytochrome c and activated caspase-3 in U18666A-treated neurons. The cathepsin D inhibitor, pepstatin A, partially protected neurons against toxicity by attenuating these signaling mechanisms. Additionally, down-regulation of cathepsin D level prevented, whereas overexpression of the protease increased, vulnerability of cultured N2a cells to U18666A-induced toxicity. We also showed that extracellular cathepsin D from U18666A-treated neurons or application of exogenous enzyme can induce neurotoxicity by activating the autophagic pathway. These results suggest that increased release/activation of cathepsin D can trigger neurodegeneration and possibly development of NPC pathology. Thus, targeting cathepsin D level/activity may provide a new therapeutic opportunity for the treatment of NPC pathology.