Hepatic acyl-CoA thioesterase 1 (ACOT1) catalyzes the conversion of acyl-CoAs to fatty acids (FAs) and CoA. We sought to determine the role of ACOT1 in hepatic lipid metabolism in C57Bl/6J male mice 1 week after adenovirusmediated Acot1 knockdown. Acot1 knockdown reduced liver triglyceride (TG) as a result of enhanced TG hydrolysis and subsequent FA oxidation. In vitro experiments demonstrated that Acot1 knockdown led to greater TG turnover and FA oxidation, suggesting that ACOT1 is important for controlling the rate of FA oxidation. Despite increased FA oxidation, Acot1 knockdown reduced the expression of peroxisome proliferator-activated receptor a (PPARa) target genes, whereas overexpression increased PPARa reporter activity, suggesting ACOT1 regulates PPARa by producing FA ligands. Moreover, ACOT1 exhibited partial nuclear localization during fasting and cAMP/cAMP-dependent protein kinase signaling, suggesting local regulation of PPARa. As a consequence of increased FA oxidation and reduced PPARa activity, Acot1 knockdown enhanced hepatic oxidative stress and inflammation. The effects of Acot1 knockdown on PPARa activity, oxidative stress, and inflammation were rescued by supplementation with Wy-14643, a synthetic PPARa ligand. We demonstrate through these results that ACOT1 regulates fasting hepatic FA metabolism by balancing oxidative flux and capacity.