Comparative gene identification 58 (CGI-58) is a lipid droplet-associated protein that promotes the hydrolysis of triglyceride by activating adipose triglyceride lipase. Loss-of-function mutations in CGI-58 in humans lead to Chanarin-Dorfman syndrome, a condition in which triglyceride accumulates in various tissues, including the skin, liver, muscle, and intestines. Therefore, without adequate CGI-58 expression, lipids are stored rather than used for fuel, signaling intermediates, and membrane biosynthesis. CGI-58 knockdown in mice using antisense oligonucleotide (ASO) treatment also leads to severe hepatic steatosis as well as increased hepatocellular diacylglycerol (DAG) content, a well-documented trigger of insulin resistance. Surprisingly, CGI-58 knockdown mice remain insulin-sensitive, seemingly dissociating DAG from the development of insulin resistance. Therefore, we sought to determine the mechanism responsible for this paradox. Hyperinsulinemic-euglycemic clamp studies reveal that the maintenance of insulin sensitivity with CGI-58 ASO treatment could entirely be attributed to protection from lipid-induced hepatic insulin resistance, despite the apparent lipotoxic conditions. Analysis of the cellular compartmentation of DAG revealed that DAG increased in the membrane fraction of high fat-fed mice, leading to PKCe activation and hepatic insulin resistance. However, DAG increased in lipid droplets or lipid-associated endoplasmic reticulum rather than the membrane of CGI-58 ASO-treated mice, and thus prevented PKCe translocation to the plasma membrane and induction of insulin resistance. Taken together, these results explain the disassociation of hepatic steatosis and DAG accumulation from hepatic insulin resistance in CGI-58 ASO-treated mice, and highlight the importance of intracellular compartmentation of DAG in causing lipotoxicity and hepatic insulin resistance.nonalcoholic fatty liver disease | type 2 diabetes N onalcoholic fatty liver disease (NAFLD) is now the most common chronic liver disease in the United States and is strongly associated with hepatic insulin resistance and type 2 diabetes (1, 2). Although NAFLD is characterized by excessively high triglycerides in the liver, the triglycerides do not appear to be detrimental to hepatic insulin sensitivity (3, 4). Rather, other lipid moieties, such as diacylglycerols (DAG) and ceramides, have been implicated as the molecular triggers of insulin resistance (5-7). The mechanism whereby these lipids cause insulin resistance are diverse: DAGs cause insulin resistance through activation of PKCe in liver, leading to the inhibition of insulin-receptor kinase activity (8, 9), and PKCθ in skeletal muscle, leading to insulinreceptor substrate-1 serine phosphorylation on sites that interfere with insulin action (10-12). Ceramides have been proposed to inhibit AKT2 activation by either activating PP2A, which dephosphorylates and deactivates AKT2, or activating PKCζ, which phosphorylates AKT on an inhibitory residue and prevents its translocation to the plasma ...