Phospholipase D3 (PLD3) is a protein of unclear function that structurally resembles other members of the phospholipase D superfamily. A coding variant in this gene confers increased risk for the development of Alzheimer's disease (AD), although the magnitude of this effect has been controversial. Because of the potential significance of this obscure protein, we undertook a study to observe its distribution in normal human brain and AD-affected brain, determine whether PLD3 is relevant to memory and cognition in sporadic AD, and to evaluate its molecular function. In human neuropathological samples, PLD3 was primarily found within neurons and colocalized with lysosome markers (LAMP2, progranulin, and cathepsins D and B). This colocalization was also present in AD brain with prominent enrichment on lysosomal accumulations within dystrophic neurites surrounding β-amyloid plaques. This pattern of protein distribution was conserved in mouse brain in wild type and the 5xFAD mouse model of cerebral β-amyloidosis. We discovered PLD3 has phospholipase D activity in lysosomes. A coding variant in PLD3 reported to confer AD risk significantly reduced enzymatic activity compared to wild-type PLD3. PLD3 mRNA levels in the human pre-frontal cortex inversely correlated with β-amyloid pathology severity and rate of cognitive decline in 531 participants enrolled in the Religious Orders Study and Rush Memory and Aging Project. PLD3 levels across genetically diverse BXD mouse strains and strains crossed with 5xFAD mice correlated strongly with learning and memory performance in a fear conditioning task. In summary, this study identified a new functional mammalian phospholipase D isoform which is lysosomal and closely associated with both β-amyloid pathology and cognition. Author summary: A rare variant in phosphlipase D3 (PLD3) was linked to Alzheimer's disease (AD) risk, but both the impact of the variant on protein's function and the role of PLD3 in sporadic AD are unknown. Here we show that PLD3 is a lysosomal phospholipase D and that the AD-associated variant impairs its function. We also discovered that PLD3 expression levels correlate β-amyloid plaque density and the rate of cognitive decline in the longitudinal Religious Orders Study and Rush Memory and Aging Project. Finally, we observed PLD3 expression levels correlated with memory and learning in a genetically diverse mouse model. These discoveries establish that PLD3 is an important AD risk gene and implicate PLD3 in the neurobiology of lysosomal dysfunction in AD. [ABSTRACT FROM AUTHOR]