Variants in the phospholipase D3 (PLD3) gene have genetically been linked to late-onset Alzheimer's disease. We present a detailed biochemical analysis of PLD3 and reveal its endogenous localization in endosomes and lysosomes. PLD3 reaches lysosomes as a type II transmembrane protein via a (for mammalian cells) uncommon intracellular biosynthetic route that depends on the ESCRT (endosomal sorting complex required for transport) machinery. PLD3 is sorted into intraluminal vesicles of multivesicular endosomes, and ESCRT-dependent sorting correlates with ubiquitination. In multivesicular endosomes, PLD3 is subjected to proteolytic cleavage, yielding a stable glycosylated luminal polypeptide and a rapidly degraded N-terminal membrane-bound fragment. This pathway closely resembles the delivery route of carboxypeptidase S to the yeast vacuole. Our experiments reveal a biosynthetic route of PLD3 involving proteolytic processing and ESCRT-dependent sorting for its delivery to lysosomes in mammalian cells.