Dietary supplementation with fish oil, rich in n-3 fatty acids such as EPA (20:5n-3), has been shown in many studies to exert a hypotriglyceridemic effect by reducing both plasma triglycerides (TG) in the form of VLDL and intrahepatic TG that is presented in cytoplasm as lipid droplets. However, cellular or molecular mechanisms by which n-3 fatty acid treatment could reduce hepatic TG remain to be defined. We used a well-characterized cell culture system that possesses the ability to synthesize and secreted TG-rich VLDL1 to determine the effect of EPA treatment on the synthesis, storage, turnover, and secretion of TG. Robust accumulation of lipid droplets occurs when hepatic cells were cultured under lipid-rich conditions, and prolonged exposure of the cells to lipids could lead to impaired TG secretion and steatosis. Treatment of the lipid-laden cells with EPA effectively cleared the storage lipid droplets within a few hours. The enhanced turnover of lipid droplets in EPA-treated cells was not attributable to increased TG secretion, because EPA-treatment also impaired VLDL1 assembly/secretion. The droplet turnover required the activity of lysosomes and could be blocked either by NH4Cl treatment or by silencing LAMP1 or Rab7. Inactivation of Atg5, ATGL, or HSL had no effect on the droplets turnover, indicating that the process is independent of autophagosome formation or cytosolic lipase activities. Live cell imaging of cells treated with EPA showed dynamic “kiss-and-run” events between lysosomes and the droplets, which were accompanied with augmented beta-oxidation. Treatment of cells with nocodazole or silencing the Rab7 effctors FYCO1 and RILP, respectively, completely blocked the EPA-induced droplet turnover, suggesting that the movement of lysosomes was essential for the kiss-and-run process. Moreover, overexpression of Arl8b, a lysosome-associated Arf-like GTPase, markedly accelerated the EPA-induced droplet turnover. These results reveal a novel mechanism responsible for the hypolipidemic effect of n-3 fatty treatment, and suggest a therapeutic potential for n-3 fatty acids in the treatment of hepatosteatosis.