Loss-of-function mutations in progranulin (GRN) are a major genetic cause of frontotemporal dementia (FTD), possibly due to loss of progranulin’s neurotrophic and anti-inflammatory effects. Progranulin promotes neuronal growth and protects against excitotoxicity and other forms of injury. It is unclear if these neurotrophic effects are mediated through cellular signaling or through promotion of lysosomal function. Progranulin is a secreted proprotein that may activate neurotrophic signaling through cell-surface receptors. However, progranulin is efficiently trafficked to lysosomes and is necessary for maintaining lysosomal function. To determine which of these mechanisms mediates progranulin’s protection against excitotoxicity, we generated lentiviral vectors expressing progranulin (PGRN) or lysosome-targeted progranulin (L-PGRN). L-PGRN was generated by fusing the LAMP-1 transmembrane and cytosolic domains to the C-terminus of progranulin. L-PGRN exhibited no detectable secretion, but was delivered to lysosomes and processed into granulins. PGRN and L-PGRN protected against NMDA excitotoxicity in rat primary cortical neurons, but L-PGRN had more consistent protective effects than PGRN. L-PGRN’s protective effects were likely mediated through the autophagy-lysosomal pathway. In control neurons, an excitotoxic dose of NMDA stimulated autophagy, and inhibiting autophagy with 3-methyladenine reduced excitotoxic cell death. L-PGRN blunted the autophagic response to NMDA and occluded the protective effect of 3-methyladenine. This was not due to a general impairment of autophagy, as L-PGRN increased basal autophagy and did not alter autophagy after nutrient starvation. These data show that progranulin’s protection against excitotoxicity does not require extracellular progranulin, but is mediated through lysosomes, providing a mechanistic link between progranulin’s lysosomal and neurotrophic effects.