Although excessive lipid accumulation is a hallmark of obesity-related pathologies, some lipids are beneficial. Oleic acid (OA), the most abundant monounsaturated fatty acid (FA), promotes health and longevity. Here, we show that OA benefits Caenorhabditis elegans by activating the endoplasmic reticulum (ER)-resident transcription factor SKN-1A (Nrf1/NFE2L1) in a lipid homeostasis response. SKN-1A/Nrf1 is cleared from the ER by the ER-associated degradation (ERAD) machinery and stabilized when proteasome activity is low and canonically maintains proteasome homeostasis. Unexpectedly, OA increases nuclear SKN-1A levels independently of proteasome activity, through lipid droplet-dependent enhancement of ERAD. In turn, SKN-1A reduces steatosis by reshaping the lipid metabolism transcriptome and mediates longevity from OA provided through endogenous accumulation, reduced H3K4 trimethylation, or dietary supplementation. Our findings reveal an unexpected mechanism of FA signal transduction, as well as a lipid homeostasis pathway that provides strategies for opposing steatosis and aging, and may mediate some benefits of the OA-rich Mediterranean diet.