The function of lysosomes relies on the ability of the lysosomal membrane to fuse with several target membranes in the cell. It is known that in lysosomal storage disorders (LSDs), lysosomal accumulation of several types of substrates is associated with lysosomal dysfunction and impairment of endocytic membrane traffic. By analysing cells from two severe neurodegenerative LSDs, we observed that cholesterol abnormally accumulates in the endolysosomal membrane of LSD cells, thereby reducing the ability of lysosomes to efficiently fuse with endocytic and autophagic vesicles. Furthermore, we discovered that soluble N-ethylmaleimide-sensitive factor attachment protein (SNAP) receptors (SNAREs), which are key components of the cellular membrane fusion machinery are aberrantly sequestered in cholesterol-enriched regions of LSD endolysosomal membranes. This abnormal spatial organization locks SNAREs in complexes and impairs their sorting and recycling. Importantly, reducing membrane cholesterol levels in LSD cells restores normal SNARE function and efficient lysosomal fusion. Our results support a model by which cholesterol abnormalities determine lysosomal dysfunction and endocytic traffic jam in LSDs by impairing the membrane fusion machinery, thus suggesting new therapeutic targets for the treatment of these disorders.