Aging is a prominent risk factor for Alzheimer's disease (AD), but the cellular mechanisms underlying neuronal phenotypes remain elusive. Both accumulation of amyloid plaques and neurofibrillary tangles in the brain1 and age-linked organelle deficits2-7 are proposed as causes of AD phenotypes but the relationship between these events is unclear. Here, we address this question using a transdifferentiated neuron (tNeuron) model directly from human dermal fibroblasts. Patient-derived tNeurons retain aging hallmarks and exhibit AD-linked deficits. Quantitative tNeuron proteomic analyses identify aging and AD-linked deficits in proteostasis and organelle homeostasis, particularly affecting endosome-lysosomal components. The proteostasis and lysosomal homeostasis deficits in aged tNeurons are exacerbated in sporadic and familial AD tNeurons, promoting constitutive lysosomal damage and defects in ESCRT-mediated repair. We find deficits in neuronal lysosomal homeostasis lead to inflammatory cytokine secretion, cell death and spontaneous development of Aß and phospho-Tau deposits. These proteotoxic inclusions co-localize with lysosomes and damage markers and resemble inclusions in brain tissue from AD patients and APP-transgenic mice. Supporting the centrality of lysosomal deficits driving AD phenotypes, lysosome-function enhancing compounds reduce AD-associated cytokine secretion and Aβ deposits. We conclude that proteostasis and organelle deficits are upstream initiating factors leading to neuronal aging and AD phenotypes.