Astrocytes are a major cell type in the central nervous system (CNS) that play a key role in regulating homeostatic functions, responding to injuries, and maintaining the blood-brain barrier. Astrocytes also regulate neuronal functions and survival by modulating myelination and degradation of pathological toxic protein aggregates. Astrocytes have recently been proposed to possess both autophagic activity and active phagocytic capability which largely depend on sufficiently acidified lysosomes for complete degradation of cellular cargos. Defective lysosomal acidification in astrocytes impairs their autophagic and phagocytic functions, resulting in the accumulation of cellular debris, excessive myelin and lipids, and toxic protein aggregates, which ultimately contributes to the propagation of neuroinflammation and neurodegenerative pathology. Restoration of lysosomal acidification in impaired astrocytes represent new neuroprotective strategy and therapeutic direction. In this review, we summarize pathogenic factors, including neuroinflammatory signaling, metabolic stressors, myelin and lipid mediated toxicity, and toxic protein aggregates, that contribute to lysosomal acidification impairment and associated autophagic and phagocytic dysfunction in astrocytes. We discuss the role of lysosomal acidification dysfunction in astrocyte-mediated neuroinflammation primarily in the context of neurodegenerative diseases along with other brain injuries. We then highlight re-acidification of impaired lysosomes as a therapeutic strategy to restore autophagic and phagocytic functions as well as lysosomal degradative capacity in astrocytes. We conclude by providing future perspectives on the role of astrocytes as phagocytes and their crosstalk with other CNS cells to impart neurodegenerative or neuroprotective effects.