Deposition of aggregated amyloid beta (Aβ) is a major hallmark of Alzheimer’s disease (AD)—a common age-related neurodegenerative disorder. Typically, Aβ is generated as a peptide of varying lengths. However, a major fraction of Aβ peptides in the brains of AD patients has undergone posttranslational modifications, which often radically change the properties of the peptides. Aβ3(pE)-42 is an N-truncated, pyroglutamate-modified variant that is abundantly present in AD brain and was suggested to play a role early in the pathogenesis. Here we show that intracellular accumulation of oligomeric aggregates of Aβ3(pE)-42 results in loss of lysosomal integrity. Using a novel antibody specific for aggregates of AβpE3, we show that in postmortem human brain tissue, aggregated AβpE3 is predominantly found in the lysosomes of both neurons and glial cells. Our data further demonstrate that AβpE3 is relatively resistant to lysosomal degradation, which may explain its accumulation in the lysosomes. The intracellular AβpE3 aggregates increase in an age-dependent manner. The results presented in this study support a model where Aβ pathology and aging converge, leading to accumulation of the degradation-resistant pE-modified Aβ in the lysosomes, lysosomal dysfunction, and neurodegeneration.