Muscle atrophy occurs in many pathological states and results primarily from accelerated protein degradation and activation of the ubiquitin-proteasome pathway. However, the importance of lysosomes in muscle atrophy has received little attention. Activation of FoxO transcription factors is essential for the atrophy induced by denervation or fasting, and activated FoxO3 by itself causes marked atrophy of muscles and myotubes. Here, we report that FoxO3 does so by stimulating overall protein degradation and coordinately activating both lysosomal and proteasomal pathways. Surprisingly, in C2C12 myotubes, most of this increased proteolysis is mediated by lysosomes. Activated FoxO3 stimulates lysosomal proteolysis in muscle (and other cell types) by activating autophagy. FoxO3 also induces the expression of many autophagy-related genes, which are induced similarly in mouse muscles atrophying due to denervation or fasting. These studies indicate that decreased IGF-1-PI3K-Akt signaling activates autophagy not only through mTOR but also more slowly by a transcription-dependent mechanism involving FoxO3.