Incomplete lysosomal acidification in microglia inhibits the degradation of fibrillar forms of Alzheimer's amyloid β peptide (fAβ). Here we show that in primary microglia a chloride transporter, ClC-7, is not delivered efficiently to lysosomes, causing incomplete lysosomal acidification. ClC-7 protein is synthesized by microglia but it is mistargeted and appears to be degraded by an endoplasmic reticulum-associated degradation pathway. Activation of microglia with macrophage colony-stimulating factor induces trafficking of ClC-7 to lysosomes, leading to lysosomal acidification and increased fAβ degradation. ClC-7 associates with another protein, Ostm1, which plays an important role in its correct lysosomal targeting. Expression of both ClC-7 and Ostm1 is increased in activated microglia, which can account for the increased delivery of ClC-7 to lysosomes. Our findings suggest a novel mechanism of lysosomal pH regulation in activated microglia that is required for fAβ degradation.