Recessive Stargardt disease (STGD1) is an inherited juvenile maculopathy caused by mutations in the ABCA4 gene, for which there is no suitable treatment. Loss of functional ABCA4 in the retinal pigment epithelium (RPE) alone, without contribution from photoreceptor cells, was shown to induce STGD1 pathology. Here, we identified cathepsin D (CatD), the primary RPE lysosomal protease, as a key molecular player contributing to endo-lysosomal dysfunction in STGD1 using a newly developed "disease-in-a-dish" RPE model from confirmed STGD1 patients. Induced pluripotent stem cell (iPSC)-derived RPE originating from three STGD1 patients exhibited elevated lysosomal pH, as previously reported in Abca4(-/-) mice. CatD protein maturation and activity were impaired in RPE from STGD1 patients and Abca4(-/-) mice. Consequently, STGD1 RPE cells have reduced photoreceptor outer segment degradation and abnormal accumulation of α-synuclein, the natural substrate of CatD. Furthermore, dysfunctional ABCA4 in STGD1 RPE cells results in intracellular accumulation of autofluorescent material and phosphatidylethanolamine (PE). The altered distribution of PE associated with the internal membranes of STGD1 RPE cells presumably compromises LC3-associated phagocytosis, contributing to delayed endo-lysosomal degradation activity. Drug-mediated re-acidification of lysosomes in the RPE of STGD1 restores CatD functional activity and reduces the accumulation of immature CatD protein loads. This preclinical study validates the contribution of CatD deficiencies to STGD1 pathology and provides evidence for an efficacious therapeutic approach targeting RPE cells. Our findings support a cell-autonomous RPE-driven pathology, informing future research aimed at targeting RPE cells to treat ABCA4-mediated retinopathies.