Liver steatosis is a common health problem associated with hepatitis C virus (HCV) and an important risk factor for the development of liver fibrosis and cancer. Steatosis is caused by triglycerides (TG) accumulating in lipid droplets (LDs), cellular organelles composed of neutral lipids surrounded by a monolayer of phospholipids. The HCV nucleocapsid core localizes to the surface of LDs and induces steatosis in cultured cells and mouse livers by decreasing intracellular TG degradation (lipolysis). Here we report that core at the surface of LDs interferes with the activity of adipose triglyceride lipase (ATGL), the key lipolytic enzyme in the first step of TG breakdown. Expressing core in livers or mouse embryonic fibroblasts of ATGL(-/-) mice no longer decreases TG degradation as observed in LDs from wild-type mice, supporting the model that core reduces lipolysis by engaging ATGL. Core must localize at LDs to inhibit lipolysis, as ex vivo TG hydrolysis is impaired in purified LDs coated with core but not when free core is added to LDs. Coimmunoprecipitation experiments revealed that core does not directly interact with the ATGL complex but, unexpectedly, increased the interaction between ATGL and its activator CGI-58 as well as the recruitment of both proteins to LDs. These data link the anti-lipolytic activity of the HCV core protein with altered ATGL binding to CGI-58 and the enhanced association of both proteins with LDs.