The phospholipase PNPLA7 functions as a lysophosphatidylcholine hydrolase and interacts with lipid droplets through its catalytic domain.

Mammalian patatin-like phospholipase domain-containing proteins (PNPLAs) are lipid-metabolizing enzymes with essential roles in energy metabolism, skin barrier development, and brain function. A detailed annotation of enzymatic activities and structure-function relationships remains an important prerequisite to understand PNPLA functions in (patho-)physiology, for example, in disorders such as neutral lipid storage disease, non-alcoholic fatty liver disease, and neurodegenerative syndromes. In this study, we characterized the structural features controlling the subcellular localization and enzymatic activity of PNPLA7, a poorly annotated phospholipase linked to insulin signaling and energy metabolism. We show that PNPLA7 is an endoplasmic reticulum (ER) transmembrane protein that specifically promotes hydrolysis of lysophosphatidylcholine in mammalian cells. We found that transmembrane and regulatory domains in the PNPLA7 N-terminal region cooperate to regulate ER targeting but are dispensable for substrate hydrolysis. Enzymatic activity is instead mediated by the C-terminal domain, which maintains full catalytic competence even in the absence of N-terminal regions. Upon elevated fatty acid flux, the catalytic domain targets cellular lipid droplets and promotes interactions of PNPLA7 with these organelles in response to increased cAMP levels. We conclude that PNPLA7 acts as an ER-anchored lysophosphatidylcholine hydrolase that is composed of specific functional domains mediating catalytic activity, subcellular positioning, and interactions with cellular organelles. Our study provides critical structural insights into an evolutionarily conserved class of phospholipid-metabolizing enzymes.