Dystrophic neurites (also termed axonal spheroids) are found around amyloid deposits in Alzheimer's disease (AD), where they impair axonal electrical conduction, disrupt neural circuits and correlate with AD severity. Despite their importance, the mechanisms underlying spheroid formation remain incompletely understood. To address this, we developed a proximity labeling approach to uncover the proteome of spheroids in human postmortem and mouse brains. Additionally, we established a human induced pluripotent stem cell (iPSC)-derived AD model enabling mechanistic investigation and optical electrophysiology. These complementary approaches revealed the subcellular molecular architecture of spheroids and identified abnormalities in key biological processes, including protein turnover, cytoskeleton dynamics and lipid transport. Notably, the PI3K/AKT/mTOR pathway, which regulates these processes, was activated in spheroids. Furthermore, phosphorylated mTOR levels in spheroids correlated with AD severity in humans. Notably, mTOR inhibition in iPSC-derived neurons and mice ameliorated spheroid pathology. Altogether, our study provides a multidisciplinary toolkit for investigating mechanisms and therapeutic targets for axonal pathology in neurodegeneration.