Insulin resistance is a major feature of pathological states such as obesity and diabetes. A consequence of insulin resistance is enhanced lipolysis, which causes excessive release of free fatty acids and deregulates fatty acid homeostasis. The transcription factor FOXO1 has a central role in the regulation of glucose levels by insulin: reduced insulin signaling causes FOXO1 activation, which increases hepatic glucose production by activating transcription of phosphoenolpyruvate carboxykinase and glucose-6-phosphatase mRNAs. Our results suggest an additional role for FOXO transcription factors: the regulation of lipid homeostasis by insulin. Here, we show that in flies, dFOXO regulates lipase 4 (dLip4), a Drosophila homologue of human acid lipases. dFOXO binds and activates the dLip4 promoter, in vitro and in vivo, and regulates dLip4 expression. In addition, dLip4 mRNA expression in flies is dependent on dFOXO. Our results support a model where dFOXO acts as a key modulator of lipid metabolism by insulin signaling and integrates insulin responses to glucose and lipid homeostasis.