Obesity is closely associated with non-alcoholic fatty liver disease (NAFLD), and elevated serum palmitate is the link between obesity and excessive hepatic lipid accumulation. Forkhead box O-1 (FoxO1) is one of the FoxO family members of transcription factors and can stimulate adipose triglyceride lipase (ATGL) and suppress its inhibitor G0/G1 switch gene 2 (G0S2) expression in the liver. However, previous researches have also shown conflicting results regarding the role of FoxO1 in hepatic lipid accumulation. We therefore examined the role of FoxO1 as a downstream suppressor to palmitate-stimulated hepatic steatosis. Palmitate significantly promoted lipid accumulation but inhibited lipid decomposition in human HepG2 hepatoma cells. Palmitate also significantly reduced FoxO1, ATGL and its activator comparative gene identification-58 (CGI-58) expression but increased peroxisome proliferator-activated receptorγ (PPARγ) and its target gene G0S2 expression. FoxO1 overexpression significantly increased palmitate-inhibited ATGL and CGI-58 expression but reduced palmitate-stimulated PPARγ and its target gene G0S2 expression. FoxO1 overexpression also inhibited lipid accumulation and promoted lipolysis in palmitate-treated hepatocytes. Overall, these results indicate that FoxO1-mediated ATGL-dependent lipolysis may be an effective molecular mechanism in protecting hepatocytes from palmitate-induced fat accumulation.