Background: When stressed, eukaryotic cells produce triacylglycerol (TAG) to store nutrients and mobilize autophagy to combat internal damage. We and others previously reported that in yeast, elimination of TAG synthesizing enzymes inhibits autophagy under nitrogen starvation, yet the underlying mechanism has remained elusive. Results: Here, we show that disruption of TAG synthesis led to diacylglycerol (DAG) accumulation and its relocation from the vacuolar membrane to the endoplasmic reticulum (ER). We further show that, beyond autophagy, ERaccumulated DAG caused severe defects in the endomembrane system, including disturbing the balance of ER-Golgi protein trafficking, manifesting in bulging of ER and loss of the Golgi apparatus. Genetic or chemical manipulations that increase consumption or decrease supply of DAG reversed these defects. In contrast, increased amounts of precursors of glycerolipid synthesis, including phosphatidic acid and free fatty acids, did not replicate the effects of excess DAG. We also provide evidence that the observed endomembrane defects do not rely on Golgi-produced DAG, Pkc1 signaling, or the unfolded protein response. Conclusions: This work identifies DAG as the critical lipid molecule responsible for autophagy inhibition under condition of defective TAG synthesis and demonstrates the disruption of ER and Golgi function by excess DAG as the potential cause of the autophagy defect.