Autophagy is activated by prolonged fasting but cannot overcome the ensuing hepatic lipid overload, resulting in fatty liver. Here, we describe a peroxisome-lysosome metabolic link that restricts autophagic degradation of lipids. Acyl-CoA oxidase 1 (Acox1), the enzyme that catalyzes the first step in peroxisomal β-oxidation, is enriched in liver and further increases with fasting or high-fat diet (HFD). Liver-specific Acox1 knockout (Acox1-LKO) protected mice against hepatic steatosis caused by starvation or HFD due to induction of autophagic degradation of lipid droplets. Hepatic Acox1 deficiency markedly lowered total cytosolic acetyl-CoA levels, which led to decreased Raptor acetylation and reduced lysosomal localization of mTOR, resulting in impaired activation of mTORC1, a central regulator of autophagy. Dichloroacetic acid treatment elevated acetyl-CoA levels, restored mTORC1 activation, inhibited autophagy, and increased hepatic triglycerides in Acox1-LKO mice. These results identify peroxisome-derived acetyl-CoA as a key metabolic regulator of autophagy that controls hepatic lipid homeostasis.