Human triacylglycerol hydrolase (hTGH) has been shown to play a role in hepatic lipid metabolism. Triacylglycerol hydrolase (TGH) hydrolyzes insoluble carboxylic esters at lipid/water interfaces, although the mechanism by which the enzyme adsorbs to lipid droplets is unclear. Three-dimensional modeling of hTGH predicts that catalytic residues are adjacent to an alpha-helix that may mediate TGH/lipid interaction. The helix contains a putative neutral lipid binding domain consisting of the octapeptide FLDLIADV (amino acid residues 417-424) with the consensus sequence FLXLXXXn (where n is a nonpolar residue and X is any amino acid except proline) identified in several other proteins that bind or metabolize neutral lipids. Deletion of this alpha-helix abolished the lipolytic activity of hTGH. Replacement of F417 with alanine reduced activity by 40% toward both insoluble and soluble esters, whereas replacement of L418 and L420 with alanine did not. Another potential mechanism of increasing TGH affinity for lipid is via reversible acylation. Molecular modeling predicts that C390 is available for covalent acylation. However, neither chemical modification of C390 nor mutation to alanine affected activity. Our findings indicate that F417 but not L418, L420, or C390 participates in substrate hydrolysis by hTGH.