Lipid droplets (LD) are triglyceride storing organelles that have emerged as an important component of cellular inflammatory responses. LD lipolysis via adipose triglyceride lipase (ATGL), the enzyme that catalyses the rate-limiting step of triglyceride lipolysis, regulates inflammation in peripheral immune and non-immune cells. ATGL elicits both pro- and anti-inflammatory responses in the periphery in a cell-type dependent manner. The present study determined the impact of ATGL inhibition and microglia-specific ATGL genetic loss-of-function on acute inflammatory and behavioural responses to pro-inflammatory insult. First, we evaluated the impact of lipolysis inhibition on lipopolysaccharide (LPS)-induced expression and secretion of cytokines and phagocytosis in mouse primary microglia cultures. Lipase inhibitors (ORlistat and ATGListatin) and LPS led to LD accumulation in microglia. Pan-lipase inhibition with ORlistat alleviated LPS-induced expression of IL-1β and IL-6. Specific inhibition of ATGL had a similar action on CCL2, IL-1β and IL-6 expression in both neonatal and adult microglia cultures. CCL2 and IL-6 secretion were also reduced by ATGListatin or knockdown of ATGL. ATGListatin increased phagocytosis in neonatal cultures independently from LPS treatment. Second, targeted and untargeted lipid profiling revealed that ATGListatin reduced LPS-induced generation of pro-inflammatory prostanoids and modulated ceramide species in neonatal microglia. Finally, the role of microglial ATGL in neuroinflammation was assessed using a novel microglia-specific and inducible ATGL knockout mouse model. Loss of microglial ATGL in adult male mice dampened LPS-induced expression of IL-6 and IL-1β and microglial density. LPS-induced sickness- and anxiety-like behaviours were also reduced in male mice with loss of ATGL in microglia. Together, our results demonstrate potent anti-inflammatory effects produced by pharmacological or genetic inhibition of ATGL-mediated triglyceride lipolysis and thereby propose that supressing microglial LD lipolysis has beneficial actions in acute neuroinflammatory conditions.