Hepatic lipid droplet (LD) catabolism is thought to occur via cytosolic lipases such as adipose triglyceride lipase (ATGL) or through autophagy of LDs, a process known as lipophagy. We tested the potential interplay between these metabolic processes and its effects on hepatic lipid metabolism. We show that hepatic ATGL is both necessary and sufficient to induce both autophagy and lipophagy. Moreover, lipophagy is required for ATGL to promote LD catabolism and the subsequent oxidation of hydrolyzed fatty acids (FAs). Following previous work showing that ATGL promotes sirtuin 1 (SIRT1) activity, studies in liver-specific SIRT1^−/− mice and in primary hepatocytes reveal that SIRT1 is required for ATGL-mediated induction of autophagy and lipophagy. Taken together, these studies show that ATGL-mediated signaling via SIRT1 promotes autophagy/lipophagy as a primary means to control hepatic LD catabolism and FA oxidation.