Dietary triglycerides, the major precursors of long chain fatty acids (FA), require hydrolysis by pancreatic enzymes prior to their absorption by the small intestine. Although Caco-2 cells are frequently employed for the study of enterocyte lipid metabolism, the presence of an endogenous lipase activity has never been previously reported. The major goal of this investigation was to determine the presence of endogenous Caco-2 cell lipase activity, to examine its capacity to hydrolyze triglycerides, and to define its intracellular location. Caco-2 cells were found to have an endogenous lipase activity, capable of hydrolyzing [1-14C]triolein from the apical cell compartment. A time and concentration dependence of lipase activity was observed, with hydrolysis of triolein into free fatty acids and monoglyceride. The majority of the lipase activity was found in the cytosolic cell fraction and, to a lesser extent, in the apical brush border membrane and other organelles. Protamine sulfate markedly reduced the Caco-2 cell lipase activity, yet it remained relatively insensitive to high concentrations of NaCl, taurocholate, calcium, heparin and chloroquine. The addition of exogenous human gastric lipase to the medium of the apical compartment resulted in a significant increased rate of hydrolysis of triolein, followed by enhanced Caco-2 cell fatty acid uptake and basolateral lipid secretion. The major esterified intracellular lipids were triglycerides and phospholipids. We conclude that Caco-2 cells possess an endogenous lipase capable of hydrolyzing cytosolic triglycerides. Furthermore, activity present on the apical membrane and secreted into the apical medium, though quantitatively less important than the cytosolic lipase, may permit an additional route for energy uptake. The addition of gastric lipase to the Caco-2 cell cultures greatly enhanced FA uptake above that seen with the endogenous lipase alone.