Hydrolysis of intracellular cholesteryl esters (CEs) represents the first step in the removal of cholesterol from lipid-laden foam cells associated with atherosclerotic lesions. Neutral cholesteryl ester hydrolase (CEH) catalyzes this reaction, and we recently cloned the cDNA for the human macrophage CEH and demonstrated increased mobilization of intracellular CE droplets by CEH overexpression. The present study was undertaken to test the hypothesis that for CE hydrolysis, CEH must become associated with the surface of the cytoplasmic lipid droplets. Our data show the redistribution of CEH from cytosol to lipid droplets upon lipid loading of human THP-1 macrophages. Depletion of triacylglycerol (TG) by incubation with the acyl-CoA synthetase inhibitor Triacsin D had no effect on CEH association with the lipid droplets, suggesting that CEH associates with mixed (CE + TG) as well as TG-depleted CE droplets. However, CEH had 2.5-fold higher activity when mixed droplets were used as substrate in an in vitro assay, consistent with the reported higher cholesterol efflux from cells containing mixed isotropic droplets. Perilipin as well as adipophilin, two lipid droplet-associated proteins, were also present on the lipid droplets in THP-1 macrophages. In conclusion, CEH associates with its intracellular substrate (lipid droplets) and hydrolyzes CE more efficiently from mixed droplets.