Sertoli cells are a type of nurse cell in the seminiferous epithelium that are crucial for sustaining spermatogenesis by extending nutritional and energy support to the developing germ cells. Dysfunction of Sertoli cells could cause disordered spermatogenesis and reduced fertility in males. In this study, we focused on the expression and function of palmitoyl protein thioesterase 1 (PPT1), a lysosomal depalmitoylating enzyme, in Sertoli cells. Here, we show that PPT1 expression in Sertoli cells is responsive to cholesterol treatment and that specific knockout of Ppt1 in Sertoli cells causes male subfertility associated with poor sperm quality and a high ratio of sperm deformity. Specifically, Ppt1 deficiency leads to poor cell variably accompanied with abnormal lysosome accumulation and increased cholesterol levels in Sertoli cells. Further, Ppt1 deficiency results in poor adhesion of developing germ cells to Sertoli cells in the seminiferous epithelium, which is likely to be responsible for the reduced male fertility as a consequence of declines in sperm count and motility as well as a high incidence of sperm head deformity. In summary, PPT1 affects sperm quality and male fertility through regulating lysosomal function and cholesterol metabolism in Sertoli cells.