Sterol-induced binding to Insigs in endoplasmic reticulum (ER) membranes triggers ubiquitination of the cholesterol biosynthetic enzyme 3-hydroxy-3-methylglutaryl CoA reductase. This ubiquitination, which is mediated by Insig-associated ubiquitin ligases gp78 and Trc8, is obligatory for extraction of reductase from lipid droplet-associated ER membranes into the cytosol for proteasome-mediated, ER-associated degradation (ERAD). In this study, we identify lipid droplet-associated, ancient, ubiquitous protein-1 (Aup1) as one of several proteins that copurify with gp78. RNA interference (RNAi) studies show that Aup1 recruits the ubiquitin-conjugating enzyme Ubc7 to lipid droplets and facilitates its binding to both gp78 and Trc8. The functional significance of these interactions is revealed by the observation that RNAi-mediated knockdown of Aup1 blunts sterol-accelerated ubiquitination of reductase, which appears to occur in lipid droplet-associated membranes and subsequent ERAD of the enzyme. In addition, Aup1 knockdown inhibits ERAD of Insig-1, another substrate for gp78, as well as that of membrane-bound precursor forms of sterol-regulatory, element-binding protein-1 and -2, transcription factors that modulate expression of genes encoding enzymes required for cholesterol synthesis. Considered together, these findings not only implicate a role for Aup1 in maintenance of intracellular cholesterol homeostasis, but they also highlight the close connections among ERAD, lipid droplets, and lipid droplet-associated proteins.