Loss-of-function mutations in progranulin (GRN) and a non-coding (GGGGCC)n hexanucleotide repeat expansions in C9ORF72 are the two most common genetic causes of frontotemporal lobar degeneration with aggregates of TAR DNA binding protein 43 (FTLD-TDP). TMEM106B encodes a type II transmembrane protein with unknown function. Genetic variants in TMEM106B associated with reduced TMEM106B levels have been identified as disease modifiers in individuals with GRN mutations and C9ORF72 expansions. Recently, loss of Tmem106b has been reported to protect the FTLD-like phenotypes in Grn-/- mice. Here, we generated Tmem106b-/- mice and examined whether loss of Tmem106b could rescue FTLD-like phenotypes in an AAV mouse model of C9ORF72-repeat induced toxicity. Our results showed that neither partial nor complete loss of Tmem106b was able to rescue behavioral deficits induced by the expression of (GGGGCC)66 repeats (66R). Loss of Tmem106b also failed to ameliorate 66R-induced RNA foci, dipeptide repeat protein formation and pTDP-43 pathological burden. We further found that complete loss of Tmem106b increased astrogliosis, even in the absence of 66R, and failed to rescue 66R-induced neuronal cell loss, whereas partial loss of Tmem106b significantly rescued the neuronal cell loss but not neuroinflammation induced by 66R. Finally, we showed that overexpression of 66R did not alter expression of Tmem106b and other lysosomal genes in vivo, and subsequent analyses in vitro found that transiently knocking down C9ORF72, but not overexpression of 66R, significantly increased TMEM106B and other lysosomal proteins. In summary, reducing Tmem106b levels failed to rescue FTLD-like phenotypes in a mouse model mimicking the toxic gain-of-functions associated with overexpression of 66R. Combined with the observation that loss of C9ORF72 and not 66R overexpression was associated with increased levels of TMEM106B, this work suggests that the protective TMEM106B haplotype may exert its effect in expansion carriers by counteracting lysosomal dysfunction resulting from a loss of C9ORF72.