The small GTPase Rab7 is a key organizer of receptor sorting and lysosomal degradation by recruiting of a variety of effectors depending on its GDP/ GTP‐bound state. However, molecular mechanisms that trigger Rab7 inactivation remain elusive. Here we find that, among the endosomal pools, Rab7‐positive compartments possess the highest level of PI4P, which is primarily produced by PI4K2A kinase. Acute conversion of this endosomal PI4P to PI(4,5)P 2 causes Rab7 dissociation from late endosomes and releases a regulator of autophagosome–lysosome fusion, PLEKHM1, from the membrane. Rab7 effectors Vps35 and RILP are not affected by acute PI(4,5)P 2 production. Deletion of PI4K2A greatly reduces PIP5Kγ‐mediated PI(4,5)P 2 production in Rab7‐positive endosomes leading to impaired Rab7 inactivation and increased number of LC3‐positive structures with defective autophagosome–lysosome fusion. These results reveal a late endosomal PI4P‐ PI(4,5)P 2‐dependent regulatory loop that impacts autophagosome flux by affecting Rab7 cycling and PLEKHM1 association.