The majority of hepatic intracellular triacylglycerol (TG) is mobilized by lipolysis followed by reesterification to reassemble TG before incorporation into a very-low-density lipoprotein (VLDL) particle. Triacylglycerol hydrolase (TGH) is a lipase that hydrolyzes TG within hepatocytes. Immunogold electron microscopy in transfected cells revealed a disparate distribution of this enzyme within the endoplasmic reticulum (ER), with particularly intense localization in regions surrounding mitochondria. TGH is localized to the lumen of the ER by the C-terminal tetrapeptide sequence HIEL functioning as an ER retention signal. Deletion of HIEL resulted in secretion of catalytically active TGH. Mutation of HIEL to KDEL, which is the consensus ER retrieval sequence in animal cells, also resulted in ER retention and conservation of lipolytic activity. However, KDEL-TGH was not as efficient at mobilizing lipids for VLDL secretion and exhibited an altered distribution within the ER. TGH is a glycoprotein, but glycosylation is not required for catalytic activity. TGH does not hydrolyze apolipoprotein B-associated lipids. This suggests a mechanism for vectored movement of TGs onto developing VLDL in the ER as TGH may mobilize TG for VLDL assembly, but will not access this lipid once it is associated with VLDL.