Niemann-Pick C (NPC) is an autosomal recessive disorder characterized by mutations in the NPC1 or NPC2 genes encoding endolysosomal lipid transport proteins, leading to cholesterol accumulation and autophagy dysfunction. We have previously shown that enrichment of NPC1-deficient cells with the anionic lipid lysobisphosphatidic acid (LBPA; also called bis(monoacylglycerol)phosphate) via treatment with its precursor phosphatidylglycerol (PG) results in a dramatic decrease in cholesterol storage. However, the mechanisms underlying this reduction are unknown. In the present study, we showed using biochemical and imaging approaches in both NPC1-deficient cellular models and an NPC1 mouse model that PG incubation/LBPA enrichment significantly improved the compromised autophagic flux associated with NPC1 disease, providing a route for NPC1-independent endolysosomal cholesterol mobilization. PG/LBPA enrichment specifically enhanced the late stages of autophagy, and effects were mediated by activation of the lysosomal enzyme acid sphingomyelinase. PG incubation also led to robust and specific increases in LBPA species with polyunsaturated acyl chains, potentially increasing the propensity for membrane fusion events, which are critical for late-stage autophagy progression. Finally, we demonstrated that PG/LBPA treatment efficiently cleared cholesterol and toxic protein aggregates in Purkinje neurons of the NPC1 mouse model. Collectively, these findings provide a mechanistic basis supporting cellular LBPA as a potential new target for therapeutic intervention in NPC disease.