Lysosomal clearance of cellular components through autophagy is essential for maintaining cellular homeostasis and supporting animal development. In Drosophila enterocytes, the endoplasmic reticulum (ER) is selectively removed by developmentally programmed autophagy, yet how this process is regulated remains illusive. Since the fly intestine is the primary site for dietary cholesterol uptake, here, we show that cholesterol-enriched cargoes are efficiently delivered to the lysosomes for autophagic degradation during development. Specifically, cholesterol enters larval intestinal enterocytes and is initially stored in the mitochondria rather than directly delivered to the lysosomes. As development proceeds and cargo recycling is triggered in pupal enterocytes, cholesterol is transferred from the mitochondria to the ER and subsequently degraded along with associated organelles in the lysosome. Defective cholesterol transport compromises ER clearance during development. Moreover, the cholesterol recycling process requires both core autophagy machinery and ER-phagy receptor Rtnl1. These findings reveal a novel path of cholesterol uptake and redistribution during development and serving as a potential factor that modulates ER clearance by macroautophagy.