Diverse cellular processes depend on the lysosomal protease system but how cells regulate lysosomal proteolytic capacity is only partly understood. We show here that cells can respond to protease/substrate imbalance in this compartment by de novo expression of multiple lysosomal hydrolases. This response, exemplified here either by loss of asparagine endopeptidase (AEP) or other lysosomal cysteine proteases, or by increased endocytic substrate load, is not dependent on the transcription factor EB (TFEB) but rather is triggered by STAT3 activation downstream of lysosomal oxidative stress. Similar lysosomal adaptations are seen in mice and cells expressing a constitutively active form of STAT3. Our results reveal how cells can increase lysosomal protease capacity under 'fed' rather than 'starved' conditions that activate the TFEB system. In addition, STAT3 activation due to lysosomal stress likely explains the hyperproliferative kidney disease and splenomegaly observed in AEP-deficient mice.