Cholesterol activates the master growth regulator, mTORC1 kinase, by promoting its recruitment to the surface of lysosomes by the Rag guanosine triphosphatases (GTPases). The mechanisms that regulate lysosomal cholesterol content to enable mTORC1 signalling are unknown. Here, we show that oxysterol binding protein (OSBP) and its anchors at the endoplasmic reticulum (ER), VAPA and VAPB, deliver cholesterol across ER–lysosome contacts to activate mTORC1. In cells lacking OSBP, but not other VAP-interacting cholesterol carriers, the recruitment of mTORC1 by the Rag GTPases is inhibited owing to impaired transport of cholesterol to lysosomes. By contrast, OSBP-mediated cholesterol trafficking drives constitutive mTORC1 activation in a disease model caused by the loss of the lysosomal cholesterol transporter, Niemann–Pick C1 (NPC1). Chemical and genetic inactivation of OSBP suppresses aberrant mTORC1 signalling and restores autophagic function in cellular models of Niemann–Pick type C (NPC). Thus, ER–lysosome contacts are signalling hubs that enable cholesterol sensing by mTORC1, and targeting the sterol-transfer activity of these signalling hubs could be beneficial in patients with NPC.