Mutations in human CGI-58/ABHD5 cause Chanarin-Dorfman syndrome (CDS), characterized by excessive storage of triacylglycerol in tissues. CGI-58 is an alpha/beta-hydrolase fold enzyme expressed in all vertebrates. The carboxyl terminus includes a highly conserved consensus sequence (HXXXXD) for acyltransferase activity. Mouse CGI-58 was expressed in Escherichia coli as a fusion protein with two amino terminal 6-histidine tags. Recombinant CGI-58 displayed acyl-CoA-dependent acyltransferase activity to lysophosphatidic acid, but not to other lysophospholipid or neutral glycerolipid acceptors. Production of phosphatidic acid increased with time and increasing concentrations of recombinant CGI-58 and was optimal between pH 7.0 and 8.5. The enzyme showed saturation kinetics with respect to 1-oleoyl-lysophosphatidic acid and oleoyl-CoA and preference for arachidonoyl-CoA and oleoyl-CoA. The enzyme showed slight preference for 1-oleoyl lysophosphatidic acid over 1-palmitoyl, 1-stearoyl, or 1-arachidonoyl lysophosphatidic acid. Recombinant CGI-58 showed intrinsic fluorescence for tryptophan that was quenched by the addition of 1-oleoyl-lysophosphatidic acid, oleoyl-CoA, arachidonoyl-CoA, and palmitoyl-CoA, but not by lysophosphatidyl choline. Expression of CGI-58 in fibroblasts from humans with CDS increased the incorporation of radiolabeled fatty acids released from the lipolysis of stored triacylglycerols into phospholipids. CGI-58 is a CoA-dependent lysophosphatidic acid acyltransferase that channels fatty acids released from the hydrolysis of stored triacylglycerols into phospholipids.