We tested the hypothesis that TAG accumulation in the liver induced by short-term high-fat diet (HFD) in rats leads to the dysregulation of endogenous TAG degradation by lysosomal lipase (LIPA) via lysosomal pathway and is causally linked with the onset of hepatic insulin resistance. We found that LIPA could be translocated between qualitatively different depots (light and dense lysosomes). In contrast to dense lysosomal fraction, LIPA associated with light lysosomes exhibits high activity on both intracellular TAG and exogenous substrate and prandial- or diet-dependent regulation. On standard diet, LIPA activity was upregulated in fasted and downregulated in fed animals. In the HFD group, we demonstrated an increased TAG content, elevated LIPA activity, enhanced production of diacylglycerol, and the abolishment of prandial-dependent LIPA regulation in light lysosomal fraction. The impairment of insulin signalling and increased activation of PKCε was found in liver of HFD-fed animals. Lipolysis of intracellular TAG, mediated by LIPA, is increased in steatosis probably due to the enhanced formation of phagolysosomes. Consequent overproduction of diacylglycerol may represent the causal link between HFD-induced hepatic TAG accumulation and hepatic insulin resistance via PKCε activation.