A genetic variant of PNPLA3 (patatin-like phospholipase domain-containing 3; PNPLA3-I148M), a serine protease of unknown function, is associated with accumulation of triacylglycerol (TAG) in the liver. To determine the biological substrates of PNPLA3 and the effect of the I148M substitution on enzymatic activity and substrate specificity, we purified and characterized recombinant human PNPLA3 and PNPLA3-I148M. Maximal hydrolytic activity of PNPLA3 was observed against the three major glycerolipids, TAG, diacylglycerol, and monoacylglycerol, with a strong preference for oleic acid as the acyl moiety. Substitution of methionine for isoleucine at position 148 markedly decreased the V(max) of the enzyme for glycerolipids but had only a modest effect on the K(m). Purified PNPLA3 also catalyzed the hydrolysis of oleoyl-CoA, but the V(max) was 100-fold lower for oleoyl-CoA than for triolein. The thioesterase activity required the catalytic serine but was only modestly decreased by the I148M substitution. The enzyme had little or no hydrolytic activity against the other lipid substrates tested, including phospholipids, cholesteryl ester, and retinyl esters. Neither the wild-type nor mutant enzyme catalyzed transfer of oleic acid from oleoyl-CoA to glycerophosphate, lysophosphatidic acid, or diacylglycerol, suggesting that the enzyme does not promote de novo TAG synthesis. Taken together, our results are consistent with the notion that PNPLA3 plays a role in the hydrolysis of glycerolipids and that the I148M substitution causes a loss of function, although we cannot exclude the possibility that the enzyme has additional substrates or activities.