Mutation of threonine for isoleucine at codon 73 (I73T) in the human surfactant protein C (hSP-C) gene (SFTPC) accounts for a significant portion of SFTPC mutations associated with interstitial lung disease (ILD). Cell lines stably expressing tagged primary translation product of SP-C isoforms were generated to test the hypothesis that deposition of hSP-C^I73T within the endosomal system promotes disruption of a key cellular quality control pathway, macroautophagy. By fluorescence microscopy, wild-type hSP-C (hSP-C^WT) colocalized with exogenously expressed human ATP binding cassette class A3 (hABCA3), an indicator of normal trafficking to lysosomal-related organelles. In contrast, hSP-C^I73T was dissociated from hABCA3 but colocalized to the plasma membrane as well as the endosomal network. Cells expressing hSP-C^I73T exhibited increases in size and number of cytosolic green fluorescent protein/microtubule-associated protein 1 light-chain 3 (LC3) vesicles, some of which colabeled with red fluorescent protein from the gene dsRed/hSP-C^I73T. By transmission electron microscopy, hSP-C^I73T cells contained abnormally large autophagic vacuoles containing organellar and proteinaceous debris, which phenocopied ultrastructural changes in alveolar type 2 cells in a lung biopsy from a SFTPC I73T patient. Biochemically, hSP-C^I73T cells exhibited increased expression of Atg8/LC3, SQSTM1/p62, and Rab7, consistent with a distal block in autophagic vacuole maturation, confirmed by flux studies using bafilomycin A1 and rapamycin. Functionally, hSP-C^I73T cells showed an impaired degradative capacity for an aggregation-prone huntingtin-1 reporter substrate. The disruption of autophagy-dependent proteostasis was accompanied by increases in mitochondria biomass and parkin expression coupled with a decrease in mitochondrial membrane potential. We conclude that hSP-C^I73T induces an acquired block in macroautophagy-dependent proteostasis and mitophagy, which could contribute to the increased vulnerability of the lung epithelia to second-hit injury as seen in ILD.