Hexanucleotide repeat expansion in the C9orf72 gene is a leading cause of frontotemporal lobar degeneration (FTLD) with amyotrophic lateral sclerosis (ALS). Reduced expression of C9orf72 has been proposed as a possible disease mechanism. However, the cellular function of C9orf72 remains to be characterized. Here we report the identification of two binding partners of C9orf72: SMCR8 and WDR41. We show that WDR41 interacts with the C9orf72/SMCR8 heterodimer and WDR41 is tightly associated with the Golgi complex. We further demonstrate that C9orf72/SMCR8/WDR41 associates with the FIP200/Ulk1 complex, which is essential for autophagy initiation. C9orf72 deficient mice, generated using the CRISPR/Cas9 system, show severe inflammation in multiple organs, including lymph node, spleen and liver. Lymph node enlargement and severe splenomegaly are accompanied with macrophage infiltration. Increased levels of autophagy and lysosomal proteins and autophagy defects were detected in both the spleen and liver of C9orf72 deficient mice, supporting an in vivo role of C9orf72 in regulating the autophagy/lysosome pathway. In summary, our study elucidates potential physiological functions of C9orf72 and disease mechanisms of ALS/FTLD.