Lipid droplets (LDs) have well-established functions as sites for lipid storage and energy mobilization to meet the metabolic demands of cells. However, recent studies have expanded the roles of LDs to protein quality control. Lipophagy, or LD degradation by autophagy, plays a vital role not only in the mobilization of free fatty acids (FFAs) and lipid homeostasis at LDs, but also in the adaptation of cells to certain forms of stress including lipid imbalance. Recent studies have provided new mechanistic insights about the diverse types of lipophagy, in particular microlipophagy. This review summarizes key findings about the mechanisms and functions of lipophagy and highlights a novel function of LD microlipophagy as a mechanism to maintain endoplasmic reticulum (ER) proteostasis under conditions of lipid imbalance.