Adipocyte lipid-binding protein is a 14.6-kDa polypeptide that is responsible for the intracellular trafficking of fatty acids. Its structure previously has been solved in the apo and holo forms complexed with stearate and oleate. To examine the binding of lipids other than those with a carboxylate headgroup, we have determined the structure of ALBP in complex with a sulfonic acid, hexadecanesulfonic acid, and compared its structure with the natural fatty acid analog, palmitate. Crystallographic refinement led to similar models, both with R-factors of about 20% and a resolution of 1.6 Å. These results can be compared with earlier studies on C18 fatty acids, both saturated and unsaturated. The previously refined complexes with stearate and oleate in combination with the complexes of palmitate and hexadecanesulfonic acid demonstrate specific positions for water molecules bound in the internal cavity. Many of the water-binding sites are present in both the apo form and the holo forms of the protein. With ligand present, a network of 10 internalized water molecules appear to form a hydrophobic hydration region. In spite of the sp3 geometry of the sulfonic acid derivative, the headgroup occupies the same site as that of the planar carboxylate in natural fatty acids. These results demonstrate that intracellular lipid-binding proteins are capable of binding a wider variety of lipids than previously considered and reveal the importance of interior ordered water molecules in the binding cavity.