Albuminuria is a strong, independent predictor of chronic kidney disease progression. We hypothesize that podocyte processing of albumin via the lysosome may be an important determinant of podocyte injury and loss. A human urine derived podocyte-like epithelial cell (HUPEC) line was used for in vitro experiments. Albumin uptake was quantified by Western blot after loading HUPECs with fluorescein-labeled (FITC) albumin. Co-localization of albumin with lysosomes was determined by confocal microscopy. Albumin degradation was measured by quantifying FITC-albumin abundance in HUPEC lysates by Western blot. Degradation experiments were repeated using HUPECs treated with chloroquine, a lysosome inhibitor, or MG-132, a proteasome inhibitor. Lysosome activity was measured by fluorescence recovery after photo bleaching (FRAP). Cytokine production was measured by ELISA. Cell death was determined by trypan blue staining. In vivo, staining with lysosome-associated membrane protein-1 (LAMP-1) was performed on tissue from a Denys-Drash trangenic mouse model of nephrotic syndrome. HUPECs endocytosed albumin, which co-localized with lysosomes. Choloroquine, but not MG-132, inhibited albumin degradation, indicating that degradation occurs in lysosomes. Cathepsin B activity, measured by FRAP, significantly decreased in HUPECs exposed to albumin (12.5% of activity in controls) and chloroquine (12.8%), and declined further with exposure to albumin plus chloroquine (8.2%, p<0.05). Cytokine production and cell death were significantly increased in HUPECs exposed to albumin and chloroquine alone, and these effects were potentiated by exposure to albumin plus chloroquine. Compared to wild-type mice, glomerular staining of LAMP-1 was significantly increased in Denys-Drash mice and appeared to be most prominent in podocytes. These data suggest lysosomes are involved in the processing of endocytosed albumin in podocytes, and lysosomal dysfunction may contribute to podocyte injury and glomerulosclerosis in albuminuric diseases. Modifiers of lysosomal activity may have therapeutic potential in slowing the progression of glomerulosclerosis by enhancing the ability of podocytes to process and degrade albumin.