Diacylglycerol lipase α (DAGLα) hydrolyses DAG to generate the principal endocannabinoid (eCB) 2-arachidonoylglycerol (2-AG) in the central nervous system. DAGLα dependent cannabinoid (CB) signalling has been implicated in numerous processes including axonal growth and guidance, adult neurogenesis and retrograde signalling at the synapse. Recent studies have implicated DAGLα as an emerging drug target for several conditions including pain and obesity. Activity assays are critical to the drug discovery process; however, measurement of diacylglycerol lipase (DAGL) activity using its native substrate generally involves low-throughput MS techniques. Some relatively high-throughput membrane based assays utilizing surrogate substrates have been reported, but these do not take into account the rate-limiting effects often associated with the ability of a drug to cross the cell membrane. In the present study, we report the development of a live cell assay to measure DAGLα activity. Two previously reported DAGLα surrogate substrates, p-nitrophenyl butyrate (PNPB) and 6,8-difluoro-4-methylumbelliferyl octanoate (DiFMUO), were evaluated for their ability to detect DAGLα activity in live cell assays using a human cell line stably expressing the human DAGLα transgene. Following optimization, the small molecule chromogenic substrate PNPB proved to be superior by providing lower background activity along with a larger signal window between transfected and parental cells when compared with the fluorogenic substrate DiFMUO. The assay was further validated using established DAGL inhibitors. In summary, the live cell DAGLα assay reported here offers an economical and convenient format to screen for novel inhibitors as part of drug discovery programmes and compliments previously reported high-throughput membrane based DAGL assays.