© 2018 the authors. Loss-of-function mutations in progranulin, a lysosomal glycoprotein, cause neurodegenerative disease. Progranulin haploinsufficiency causes frontotemporal dementia (FTD) and complete progranulin deficiency causes CLN11 neuronal ceroid lipofuscinosis (NCL). Progranulin replacement is a rational therapeutic strategy for these disorders, but there are critical unresolved mechanistic questions about a progranulin gene therapy approach, including its potential to reverse existing pathology. Here, we address these issues using an AAV vector (AAV-Grn) to deliver progranulin in Grn−/− mice (both male and female), which model aspects of NCL and FTD pathology, developing lysosomal dysfunction, lipofuscinosis, and microgliosis. We first tested whether AAV-Grn could improve preexisting pathology. Even with treatment after onset of pathology, AAV-Grn reduced lipofuscinosis in several brain regions of Grn−/− mice. AAV-Grn also reduced microgliosis in brain regions distant from the injection site. AAV-expressed progranulin was only detected in neurons, not in microglia, indicating that the microglial activation in progranulin deficiency can be improved by targeting neurons and thus may be driven at least in part by neuronal dysfunction. Even areas with sparse transduction and almost undetectable progranulin showed improvement, indicating that low-level replacement may be sufficiently effective. The beneficial effects of AAV-Grn did not require progranulin binding to sortilin. Finally, we tested whether AAV-Grn improved lysosomal function. AAV-derived progranulin was delivered to the lysosome, ameliorated the accumulation of LAMP-1 in Grn−/− mice, and corrected abnormal cathepsin D activity. These data shed light on progranulin biology and support progranulin-boosting therapies for NCL and FTD due to GRN mutations.