Oxidative stress has been implicated in the pathogenesis of age related macular degeneration, the leading cause of blindness in older adults, with retinal pigment epithelium (RPE) cells playing a key role. To better understand the cytotoxic mechanisms underlying oxidative stress, we used cell culture and mouse models of iron overload, as iron can catalyze reactive oxygen species formation in the RPE. Iron-loading of cultured induced pluripotent stem cell-derived RPE cells increased lysosomal abundance, impaired proteolysis and reduced the activity of a subset of lysosomal enzymes, including lysosomal acid lipase (LIPA) and acid sphingomyelinase (SMPD1). In a liver-specific Hepc (Hamp) knockout murine model of systemic iron overload, RPE cells accumulated lipid peroxidation adducts and lysosomes, developed progressive hypertrophy and underwent cell death. Proteomic and lipidomic analyses revealed accumulation of lysosomal proteins, ceramide biosynthetic enzymes and ceramides. The proteolytic enzyme cathepsin D (CTSD) had impaired maturation. A large proportion of lysosomes were galectin-3 (Lgals3) positive, suggesting cytotoxic lysosomal membrane permeabilization. Collectively, these results demonstrate that iron overload induces lysosomal accumulation and impairs lysosomal function, likely due to iron-induced lipid peroxides that can inhibit lysosomal enzymes.