Lipid droplets (LDs) are intracellular storage sites for triacylglyerols (TAGs) and steryl esters, and play essential roles in energy metabolism and membrane biosynthesis. Adipose triglyceride lipase (ATGL) is the key enzyme for TAG hydrolysis (lipolysis) in adipocytes and LD degradation in nonadipocyte cells.  Lipase activity of ATGL in vivo largely depends on its C-terminal sequence as well as coactivation by CGI-58.  Here we demonstrate that the C-terminal hydrophobic domain in ATGL is required for LD targeting and CGI-58-independent LD degradation.  Overexpression of wild type ATGL causes a dramatic decrease in LD size and number, whereas a mutant lacking the hydrophobic domain fails to localize to LDs and to affect their morphology.  Interestingly, coexpression of CGI-58 is able to promote LD turnover mediated by this ATGL mutant.  Recently we have discovered that G0S2 acts as an inhibitor of ATGL activity and ATGL-mediated lipolysis.  Here we show that G0S2 binds to ATGL irrelevantly of its activity state or the presence of CGI-58.  In G0S2-expressing cells, the combined expression of CGI-58 and ATGL is incapable of stimulating LD turnover.  We propose that CGI-58 and G0S2 regulate ATGL via non-competing mechanisms.