Treatment of rats with the cholesterol pathway inhibitor AY9944 produces an animal model of Smith-Lemli-Opitz syndrome (SLOS), an autosomal recessive disease caused by defective cholesterol synthesis. This SLOS rat model undergoes progressive and irreversible degeneration of the neural retina, with associated pathological features of the retinal pigmented epithelium (RPE). Here, we provide further insights into the mechanism involved in the RPE pathology. In the SLOS rat model, markedly increased RPE apical autofluorescence is observed, compared to untreated animals, which correlates with increased levels of A2E and other bisretinoids. Utilizing cultured human induced pluripotent stem cell (iPSC)- derived SLOS RPE cells, we found significantly elevated steady-state levels of 7-dehydrocholesterol (7DHC) and decreased cholesterol levels (key biochemical hallmarks of SLOS). Western blot analysis revealed altered levels of the macroautophagy/autophagy markers MAP1LC3B-II and SQSTM1/p62, and build-up of ubiquitinated proteins. Accumulation of immature autophagosomes was accompanied by inefficient degradation of phagocytized, exogenously supplied retinal rod outer segments (as evidenced by persistence of the C-terminal 1D4 epitope of RHO [rhodopsin]) in SLOS RPE compared to iPSC-derived normal human control. SLOS RPE cells exhibited lysosomal pH levels and CTSD activity within normal physiological limits, thus discounting the involvement of perturbed lysosomal function. Furthermore, 1D4-positive phagosomes that accumulated in the RPE in both pharmacological and genetic rodent models of SLOS failed to fuse with lysosomes. Taken together, these observations suggest that defective phagosome maturation underlies the observed RPE pathology. The potential relevance of these findings to SLOS and the requirement of cholesterol for phagosome maturation are discussed. © 2018, © 2018 Informa UK Limited, trading as Taylor & Francis Group.