Cholesterol and fatty acids are essential lipids that are critical for membrane biosynthesis and fetal organ development. Cholesteryl esters (CE) are degraded by hormone-sensitive lipase (HSL) in the cytosol and by lysosomal acid lipase (LAL) in the lysosome. Impaired LAL or HSL activity causes rare pathologies in humans, with HSL deficiency presenting less severe clinical manifestations. The infantile form of LAL deficiency, a lysosomal lipid storage disorder, leads to premature death. However, the importance of defective lysosomal CE degradation and its consequences during early life are incompletely understood. We therefore investigated how defective CE catabolism affects fetus and infant maturation using Lal and Hsl knockout (-/-) mouse models. This study demonstrates that defective lysosomal but not neutral lipolysis alters placental and fetal cholesterol homeostasis and exhibits an initial disease pathology already in utero as Lal-/- fetuses accumulate hepatic lysosomal lipids. Immediately after birth, LAL deficiency exacerbates with massive hepatic lysosomal lipid accumulation, which continues to worsen into young adulthood. Our data highlight the crucial role of LAL during early development, with the first weeks after birth being critical for aggravating LAL deficiency.