Triacylglycerol (TAG) serves as the major energy reserve in higher eukaryotic organisms ( 1 ). FFAs are mobilized from TAG through the hydrolytic action of lipases to provide substrates for oxidative metabolism in tissues, as well as substrates for synthesis of complex lipids and signaling molecules. Lipolysis, the breakdown of TAG to FFA and glycerol, occurs in an orderly and regulated manner, with different enzymes acting sequentially at each step ( 1-3 ). Hydrolysis of TAG to diacylglycerol is the fi rst step ( 4-6 ), and our laboratory, and others, recently identifi ed a novel TAG hydrolase in mice that we called desnutrin ( 5 ) [also known as TTS2.2, patatin-like phospholipase A domain containing 2, iPLA ( 4 ), or in humans, adipose triglyceride lipase (ATGL) ( 6 )]. Desnutrin is highly expressed in white and brown adipose tissue, where it is a major TAG lipase, but is also found at lower levels in most other tissues where it also plays an important role in TAG hydrolysis ( 5,7,8 ).Desnutrin contains an N-terminal patatin-like domain, spanning amino acids 8-180, that is characteristic of many plant lipid acyl hydrolases ( 5, 9 ). Enzymatic activity of desnutrin is predicted to be derived from an S47-D166 catalytic dyad that lies within an ␣ - hydrolase fold in the patatin-like domain ( 5, 9 ). Mutation of the S47 residue to alanine has been shown to result in a complete loss of function in vitro, confi rming the predicted serine-esterase activity of this enzyme ( 10 ). However, the requirement of the D166 site has not yet been tested. Four individuals with point mutations in desnutrin/ATGL have been identifi ed, and all developed neutral lipid storage disease with myopathy (NLSDM) ( 11,12 ). In one, a duplication mutation within the N-terminal patatin-like domain caused a frameshift after L159 that is predicted to truncate the enzyme at amino acid position 178 as well as to cause a D166R mutaAbstract Murine desnutrin/human ATGL is a triacylglycerol (TAG) hydrolase with a predicted catalytic dyad within an ␣ - hydrolase fold in the N-terminal region. In humans, mutations resulting in C-terminal truncation cause neutral lipid storage disease with myopathy. To identify critical functional domains, we measured TAG breakdown in cultured cells by mutated or truncated desnutrin. In vitro, C-terminally truncated desnutrin displayed an even higher apparent V max than the full-length form without changes in K m , which may be explained by our fi nding of an interaction between the C-and N-terminal domains. In live cells, however, C-terminally truncated adenoviral desnutrin had lower TAG hydrolase activity. We investigated a role for the phosphorylation of C-terminal S406 and S430 residues but found that these were not necessary for TAG breakdown or lipid droplet localization in cells. The predicted N-terminal active sites, S47 and D166, were both critical for TAG hydrolysis in live cells and in vitro. We also identifi ed two overlapping N-terminal motifs that predict lipid substrate binding domains, a glycine-rich ...