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Granular corneal dystrophy type 2 (GCD2) is the most common form of transforming growth factor β‐induced (TGFBI) gene‐linked corneal dystrophy and is pathologically characterized by the corneal deposition of mutant‐TGFBIp. The defective autophagic degradation of pathogenic mutant‐TGFBIp has been shown in GCD2; however, its exact mechanisms are unknown. To address this, we investigated lysosomal functions using corneal fibroblasts. Levels of cathepsins K and L (CTSK and CTSL) were significantly decreased in GCD2 cells, but of cathepsins B and D (CTSB and CTSD) did not change. The maturation of the pro‐enzymes to their active forms (CTSB, CTSK and CTSL) was inhibited in GCD2 cells. CTSL enzymes directly degraded both LC3 (autophagosomes marker) and mutant‐TGFBIp. Exogenous CTSL expression dramatically reduced mutant‐TGFBIp in GCD2 cells, but not TGFBIp in WT cells. An increased lysosomal pH and clustered lysosomal perinuclear position were found in GCD2 cells. Transcription factor EB (TFEB) levels were significantly reduced in GCD2 cells, compared to WT. Notably, exogenous TFEB expression improved mutant‐TGFBIp clearance and lysosomal abnormalities in GCD2 cells. Taken together, lysosomal dysfunction in the corneal fibroblasts underlies the pathogenesis of GCD2, and TFEB has a therapeutic potential in the treatment of GCD2.