Intracellular recognition of lipopolysaccharide (LPS) by mouse caspase-11 or human caspase-4 is a vital event for the activation of the noncanonical inflammasome. Whether negative regulators are involved in intracellular LPS sensing is still elusive. Here we show that adipose triglyceride lipase (ATGL) is a negative regulator of the noncanonical inflammasome. Through screening for genes participating in the noncanonical inflammasome, ATGL is identified as a negative player for intracellular LPS signaling. ATGL binds LPS and catalyzes the removal of the acylated side chains that contain ester bonds. LPS with under-acylated side chains no longer activates the inflammatory caspases. Cells with ATGL deficiency exhibit enhanced immune responses when encountering intracellular LPS, including an elevated secretion of interleukin-1β, decreased cell viability and increased cell cytotoxicity. Moreover, ATGL-deficient mice show exacerbated responses to endotoxin challenges. Our results uncover that ATGL degrades cytosolic LPS to suppress noncanonical inflammasome activation.