Lysosomes receive extracellular and intracellular cholesterol and redistribute it throughout the cell. Cholesterol egress from lysosomes is critical for cholesterol homeostasis, and its failure underlies the pathogenesis of genetic disorders such as Niemann-Pick C (NPC) disease. Here we report that the BLOC one-related complex (BORC)-ARL8-homotypic fusion and protein sorting (HOPS) ensemble is required for egress of free cholesterol from lysosomes and for storage of esterified cholesterol in lipid droplets. Depletion of BORC, ARL8, or HOPS does not alter the localization of the lysosomal transmembrane cholesterol transporter NPC1 to degradative compartments but decreases the association of the luminal transporter NPC2 and increases NPC2 secretion. BORC-ARL8-HOPS depletion also increases lysosomal degradation of cation-independent (CI)-mannose 6-phosphate (M6P) receptor (MPR), which normally sorts NPC2 to the endosomal-lysosomal system and then is recycled to the trans-Golgi network. These defects likely result from impaired HOPS-dependent fusion of endosomal-lysosomal organelles and an uncharacterized function of HOPS in CI-MPR recycling. Our study demonstrates that the BORC-ARL8-HOPS ensemble is required for cholesterol egress from lysosomes by enabling CI–MPR-dependent trafficking of NPC2 to the endosomal-lysosomal system.