Vacuolar protein sorting 41 (VPS41) is as part of the Homotypic fusion and Protein Sorting (HOPS) complex required for lysosomal fusion events and, independent of HOPS, for regulated secretion. Here, we report three patients with compound heterozygous mutations in VPS41 (VPS41S285P and VPS41R662*; VPS41c.1423-2A>G and VPS41R662*) displaying neurodegeneration with ataxia and dystonia. Cellular consequences were investigated in patient fibroblasts and VPS41-depleted HeLa cells. All mutants prevented formation of a functional HOPS complex, causing delayed lysosomal delivery of endocytic and autophagic cargo. By contrast, VPS41S285P enabled regulated secretion. Strikingly, loss of VPS41 function caused a cytosolic redistribution of mTORC1, continuous nuclear localization of Transcription Factor E3 (TFE3), enhanced levels of LC3II, and a reduced autophagic response to nutrient starvation. Phosphorylation of mTORC1 substrates S6K1 and 4EBP1 was not affected. In a C. elegans model of Parkinson’s disease, co-expression of VPS41S285P/VPS41R662* abolished the neuroprotective function of VPS41 against α-synuclein aggregates. We conclude that the VPS41 variants specifically abrogate HOPS function, which interferes with the TFEB/TFE3 axis of mTORC1 signaling, and cause a neurodegenerative disease.