Increased oxidative stress, dysfunctional cellular clearance, and chronic inflammation are associated with age-related macular degeneration (AMD). Prolyl oligopeptidase (PREP) is a serine protease that has numerous cellular functions, including the regulation of oxidative stress, protein aggregation, and inflammation. PREP inhibition by KYP-2047 (4-phenylbutanoyl-L-prolyl1(S)-cyanopyrrolidine) has been associated with clearance of cellular protein aggregates and reduced oxidative stress and inflammation. Here, we studied the effects of KYP-2047 on inflammation, oxidative stress, cell viability, and autophagy in human retinal pigment epithelium (RPE) cells with reduced proteasomal clearance. MG-132-mediated proteasomal inhibition in ARPE-19 cells was used to model declined proteasomal clearance in the RPEs of AMD patients. Cell viability was assessed using LDH and MTT assays. The amounts of reactive oxygen species (ROS) were measured using 2′,7′-dichlorofluorescin diacetate (H2DCFDA). ELISA was used to determine the levels of cytokines and activated mitogen-activated protein kinases. The autophagy markers p62/SQSTM1 and LC3 were measured with the western blot method. MG-132 induced LDH leakage and increased ROS production in the ARPE-19 cells, and KYP-2047 reduced MG-132-induced LDH leakage. Production of the proinflammatory cytokine IL-6 was concurrently alleviated by KYP-2047 when compared with cells treated only with MG-132. KYP-2047 had no effect on autophagy in the RPE cells, but the phosphorylation levels of p38 and ERK1/2 were elevated upon KYP-2047 exposure, and the inhibition of p38 prevented the anti-inflammatory actions of KYP-2047. KYP-2047 showed cytoprotective and anti-inflammatory effects on RPE cells suffering from MG-132-induced proteasomal inhibition.