Although substantial data indicate that the osteogenic potential of periodontal ligament stem cells (PDLSCs) is compromised under inflammatory conditions, the underlying mechanism remains largely unexplored. In this study, we found that both the autophagy levels and autophagic flux levels were decreased in PDLSCs incubated under inflammatory conditions (I-PDLSCs). Based on the increased expression of LC3 II (at an autophagy level) and decreased accumulation of LC3 II (at an autophagic flux level) in I-PDLSCs, we speculated that the disruption of I-PDLSC autophagy arose from dysfunction of the cellular autophagy-lysosome system. Subsequently, our hypothesis was demonstrated by inhibited autophagosome-lysosome fusion, damaged lysosomal function, and suppressed activation of transcription factor EB (TFEB, a master regulator of the autophagy-lysosome system) in I-PDLSCs and verified by TFEB overexpression in I-PDLSCs. We found that gold nanoparticle (Au NP) treatment rescued the osteogenic potential of I-PDLSCs by restoring the inflammation-compromised autophagy-lysosome system. In this context, Au NP ceased to be effective when TFEB was knocked down in PDLSCs. Our data demonstrate the crucial role of the autophagy-lysosome system in cellular osteogenesis under inflammatory conditions and suggest a new target for rescuing inflammation-induced cell dysfunction using nanomaterials to aid cell biology and tissue regeneration.