Diacylglycerol kinase-ε (DGKε) catalyzes phosphorylation of diacylglycerol to phosphatidic acid with a unique specificity toward 1-stearoyl-2-arachidonoyl-sn-glycerol, which is a backbone of phosphatidylinositol (PI). Owing to this specificity, DGKε is involved in the PI cycle maintaining the cellular level of phosphorylated PI derivatives of signaling activity and was also found crucial for lipid metabolism. DGKε dysfunction is linked with the development of atypical hemolytic uremic syndrome (aHUS) and possibly other human diseases. Despite the DGKε significance, data on its regulation by cotranslational and/or post-translational modifications are scarce. Here, we report that DGKε is S-palmitoylated at Cys38/40 (mouse/human DGKε) located in the cytoplasmic end of its N-terminal putative transmembrane fragment. The S-palmitoylation of DGKε was revealed by metabolic labeling of cells with a palmitic acid analogue followed by click chemistry and with acyl-biotin and acyl-polyethylene glycol exchange assays. The S-acyltransferases zDHHC7 (zinc finger DHHC domain containing) and zDHHC17 and the zDHHC6/16 tandem were found to catalyze DGKε S-palmitoylation, which also increased the DGKε abundance. Mouse DGKε-Myc ectopically expressed in human embryonic kidney 293 cells localized to the endoplasmic reticulum where zDHHC6/16 reside and in small amounts also to the Golgi apparatus where zDHHC7 and zDHHC17 are present. The Cys38Ala substitution upregulated, whereas hyperpalmitoylation of wild-type DGKε reduced the kinase activity, indicating an inhibitory effect of the Cys38 S-palmitoylation. In addition, the substitution of neighboring Pro31 with Ala also diminished the activity of DGKε. Taken together, our data indicate that S-palmitoylation can fine-tune DGKε activity in distinct cellular compartments, possibly by affecting the distance between the kinase and its substrate in a membrane.