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Prader-Willi syndrome (PWS) is a developmental disorder caused by loss of maternally imprinted genes on 15q11-q13, including melanoma antigen gene family member L2 (MAGEL2). The clinical phenotypes of PWS suggest impaired hypothalamic neuroendocrine function; however, the exact cellular defects are unknown. Here, we report deficits in secretory granule (SG) abundance and bioactive neuropeptide production upon loss of MAGEL2 in humans and mice. Unbiased proteomic analysis of Magel2pΔ/m+ mice revealed a reduction in components of SG in the hypothalamus that was confirmed in 2 PWS patient–derived neuronal cell models. Mechanistically, we show that proper endosomal trafficking by the MAGEL2-regulated WASH complex is required to prevent aberrant lysosomal degradation of SG proteins and reduction of mature SG abundance. Importantly, loss of MAGEL2 in mice, NGN2-induced neurons, and human patients led to reduced neuropeptide production. Thus, MAGEL2 plays an important role in hypothalamic neuroendocrine function, and cellular defects in this pathway may contribute to PWS disease etiology. Moreover, these findings suggest unanticipated approaches for therapeutic intervention.