The mechanism and enzymic activities responsible for the lipolysis of stored cytosolic triacylglycerol in liver and its re-esterification remain obscure. A candidate enzyme for lipolysis, a microsomal triacylglycerol hydrolase (TGH), was recently purified to homogeneity from pig liver and its kinetic properties were determined [Lehner and Verger (1997) Biochemistry 36, 1861-1868]. We have characterized the enzyme with regard to its species distribution, subcellular localization, developmental expression and reaction with lipase inhibitors. The hydrolase co-sediments with endoplasmic reticulum elements and is associated with isolated liver fat droplets. Immunocytochemical studies localize TGH exclusively to liver cells surrounding capillaries. Both TGH mRNA and protein are expressed in rats during weaning. The enzyme covalently binds tetrahydrolipstatin, an inhibitor of lipases and of triacylglycerol hydrolysis. The enzyme is absent from liver-derived cell lines (HepG2 and McArdle RH7777) known to be impaired in very-low-density lipoprotein (VLDL) assembly and secretion. The localization and developmental expression of TGH are consistent with a proposed role in triacylglycerol hydrolysis and with the proposal that some of the resynthesized triacylglycerol is utilized for VLDL secretion.