The rare neurodegenerative disease Niemann-Pick Type C (NPC) results from mutations in either NPC1 or NPC2, which are membrane-bound and soluble lysosomal proteins, respectively. Previous studies have shown that mutations in either protein result in biochemically indistinguishable phenotypes, most notably the hyper-accumulation of cholesterol and other cargo in lysosomes. We comparatively evaluated the kinetics of [(3)H]dextran release from lysosomes of wild type, NPC1, NPC2, and NPC1/NPC2 pseudo-double mutant cells and found significant differences between all cell types examined. Specifically, NPC1 or NPC2 mutant fibroblasts treated with NPC1 or NPC2 siRNA (to create NPC1/NPC2 pseudo-double mutants) secreted dextran less efficiently than did either NPC1 or NPC2 single mutant cell lines, suggesting that the two proteins may work independently of one another in the egress of membrane-impermeable lysosomal cargo. To investigate the basis for these differences, we examined the role of NPC1 and NPC2 in the retrograde fusion of lysosomes with late endosomes to create so-called hybrid organelles, which is believed to be the initial step in the egress of cargo from lysosomes. We show here that cells with mutated NPC1 have significantly reduced rates of late endosome/lysosome fusion relative to wild type cells, whereas cells with mutations in NPC2 have rates that are similar to those observed in wild type cells. Instead of being involved in hybrid organelle formation, we show that NPC2 is required for efficient membrane fission events from nascent hybrid organelles, which is thought to be required for the reformation of lysosomes and the release of lysosomal cargo-containing membrane vesicles. Collectively, these results suggest that NPC1 and NPC2 can function independently of one another in the egress of certain membrane-impermeable lysosomal cargo.