Loss-of-function mutations in the granulin (GRN) gene cause frontotemporal dementia (FTD) in heterozygosity and neuronal ceroid lipofuscinosis (NCL), a lysosomal storage disease, in homozygosity. While it is well established that disease-causing GRN mutations decrease progranulin (PGRN) levels, leading to neurodegeneration, the cellular and molecular mechanisms underlying these conditions remain poorly understood. To investigate the impact of complete PGRN deficiency in human brain cells, we conducted two separate studies using two disease models: human induced pluripotent stem cell (iPSC)-derived forebrain organoids and microglia.Forebrain organoids allowed us to probe the effects of PGRN deficiency on neuronal and glial cell populations. By employing single-cell RNA sequencing, we uncovered robust downregulation of the mitochondrial oxidative phosphorylation pathway in PGRN KO organoids. In alignment with these results, PGRN loss led to reduced mitochondrial respiration. Additionally, we demonstrated that PGRN KO organoids showed increased levels of reactive oxygen species and exhibited key hallmarks of ferroptosis, including increased lipid peroxidation and iron accumulation. Finally, we showed that PGRN loss leads to increased susceptibility to ferroptotic cell death. In the second study, we explored the role of PGRN in human iPSC-derived microglia, a cell type absent in forebrain organoids. By integrating transcriptomic and lipidomic analyses, we revealed that PGRN plays a pivotal role in microglial lipid metabolism. PGRN KO microglia showed accumulation of triacylglycerides (TAGs) at baseline and after activation by lipopolysaccharide (LPS) exposure. Interestingly, the lipidomic profiles of resting and activated PGRN KO was distinct, with resting microglia showing a trend for enrichment of TAGs with saturated and monounsaturated long-chain fatty acids, and LPS-treated microglia showing accumulation of TAGs with very long chain polyunsaturated fatty acids. Moreover, we showed that PGRN loss leads to accumulation of lipid droplets. Transcriptomic analysis revealed that PGRN deficient microglia showed dysregulated expression of genes related to lipid metabolism, and our results suggest that PGRN loss drives lipid accumulation by inducing metabolic changes toward increased lipid synthesis and decreased lipid β-oxidation. Our findings suggest a critical role of mitochondrial dysfunction and impaired responses to oxidative stress in driving neurodegeneration associated with PGRN deficiency, and indicate an important role of PGRN in regulating microglial function and lipid metabolism.