Saposin C is one of four small lipid-binding proteins that derive from a single precursor protein, named prosaposin (PSAP). PSAP has several neuronal effects, including neurite outgrowth stimulation, neuron preservation, and nerve regeneration enhancement. A minimal domain required for PSAP's neurotrophic function is located in the amino-terminal half of saposin C. Genetic defects of the PSAP gene in humans and mice lead to a complex lysosomal storage disease. The skin fibroblasts from PSAP- and saposin C-deficient patients have a massive accumulation of multivesicular bodies (MVBs). Incorporation of exogenous saposin C-containing liposomes into the cultured PSAP-/- cells reduced the accumulated MVBs to normal levels. Internalized saposin C was localized to late endosomes and lysosomes. MVBs are crucial for maintaining the cellular homeostasis required for neuronal development and growth. PSAP-/- mice have a short life span (30 days) and central nervous system (CNS) neuronal degeneration. Similar to PSAP-/- fibroblasts, excessive MVBs accumulated in CNS neurons and brain tissues of PSAP-null mice. Cultured cortical and hippocampal neurons from PSAP-/- mice had poor survival and displayed a neurite degenerative pattern. Delivery of saposin C ex vivo into cultured neurons and in vivo into brain neuronal cells in mice across the blood-brain barrier was accomplished with intravenously administered dioleoylphosphatidylserine (DOPS) liposomes. These studies may yield a new therapeutic approach for neuron protection, preservation, and regeneration.