Three endosomal compartments including the compartment for uncoupling receptor and ligand (CURL), multivesicular bodies (MVB), and a putative recycling fraction (retrosomes) were isolated from rat liver homogenates fifteen minutes after a bolus injection of very low density lipoprotein (VLDL) was delivered into a femoral vein. Assays for enzyme markers indicate a minimal contamination with either lysosomes or Golgi. The increase in specific activity of the radiolabeled ligand (VLDL) during the isolation procedure from homogenate to MVB, demonstrates a 200-250-fold purification of this organelle. All three fractions have the ability to catabolize triacylglycerol substrate both as triolein and as VLDL triacylglycerol. Furthermore, incubation of isolated endosomes following injection of endogenously labeled VLDL demonstrate their ability to hydrolyze VLDL triacylglycerol in situ. Three distinct lipolytic pH optima were found at pH 5.5, 7.1, and 8.6. The effects of serum, MgCl2, CaCl2, NaCl, sodium dodecyl sulfate, bile acids, and antibody to hepatic triacylglycerol lipase on the individual endosome fractions demonstrated distinct lipolytic activities in the different compartments. Results indicate that both an endosomal neutral lipase as well as hepatic triacylglycerol lipase make a significant contribution to lipolytic processing of endocytosed lipoproteins prior to their resecretion of further processing in hepatic lysosomes.