These authors contributed equally.Author contributions: MB, TW, and RF conceived the project. MB acquired and analyzed the data. NM did the image analysis of LD formation, and bioinformatic analyses of lipidomics data. SDE helped in the establishment of stable cell lines and did LLSM acquisition. SB developed lipidomics pipeline and analyzed the data. LB helped in the enzymatic activities, protein purification and did qPCR analysis. MC did endoplasmic reticulum features quantification. XNL and MMG did EM. MB, TW, and RF wrote the paper.Running title: FIT2 is an ER-localized lipid phosphate phosphatase SUMMARYThe endoplasmic reticulum (ER) protein Fat-Induced Transcript 2 (FIT2) has emerged as a key factor in lipid droplet (LD) formation, although its molecular function is unknown.Highlighting its importance, FIT2 orthologs are essential in worms and mice, and FIT2 deficiency causes a deafness/dystonia syndrome in humans. Here we show that FIT2 is a lipid phosphate phosphatase (LPP) enzyme that is required for maintaining the normal structure of the ER. Recombinant FIT2 exhibits LPP activity in vitro and loss of this activity in cells leads to ER membrane morphological changes and ER stress. Defects in LD formation in FIT2 depletion appear to be secondary to membrane lipid abnormalities, possibly due to alterations in phospholipids required for coating forming LDs. Our findings uncover an enzymatic role for FIT2 in ER lipid metabolism that is crucial for ER membrane homeostasis.