Recent data both from cell-free experiments and from cultured cells have shown that lysosomes can fuse directly with late endosomes to form a hybrid organelle. This has a led to a hypothesis that dense core lysosomes are in essence storage granules for acid hydrolases and that, when the former fuse with late endosomes, a hybrid organelle for digestion of endocytosed macromolecules is created. Lysosomes are then re-formed from hybrid organelles by a process involving condensation of contents. In this Commentary we review the evidence for formation of the hybrid organelles and discuss the current status of our understanding of the mechanisms of fusion and lysosome re-formation. We also review lysosome biosynthesis, showing how recent studies of lysosome-like organelles including the yeast vacuole, Drosophila eye pigment granules and mammalian secretory lysosomes have identified novel proteins involved in this process.