TMEM106B was identified as a major risk factor in a genome-wide association study for frontotemporal lobar degeneration (FTLD) with TAR DNA-binding protein (TDP)-43 pathology. The most significant association of TMEM106B single nucleotide polymorphisms with risk of FTLD-TDP was observed in patients with progranulin (GRN) mutations. Subsequent studies suggested an inverse correlation between TMEM106B expression and GRN levels in patient serum. However, in this study, this was not confirmed as we failed to detect a significant alteration of GRN levels upon knockdown or exogenous expression of TMEM106B in heterologous cells. To provide a basis for understanding TMEM106B function in health and disease, we investigated the membrane orientation and subcellular localization of this completely uncharacterized protein. By differential membrane extraction and sequential mutagenesis of potential N-glycosylation sites, we identified TMEM106B as a type 2 integral membrane protein with a highly glycosylated luminal domain. Glycosylation is partially required for the transport of TMEM106B beyond the endoplasmic reticulum to late cellular compartments. Endogenous as well as overexpressed TMEM106B localizes to late endosomes and lysosomes. Interestingly, the inhibition of vacuolar H(+)-ATPases significantly increased the levels of TMEM106B, a finding that may provide an unexpected biochemical link to GRN, because this protein is also strongly increased under the same conditions. Our findings provide a biochemical and cell biological basis for the understanding of the pathological role of TMEM106B in FTLD, an incurable neurodegenerative disorder.