Lipophagy is the autophagic degradation of lipid droplets. Dysregulated lipophagy has been implicated in the development of non-alcoholic fatty liver disease (NAFLD). Ajugol is an active alkaloid isolated from the root of Rehmannia glutinosa which is commonly used to treat various inflammatory and metabolic diseases. This study aimed to investigate the effect of ajugol on alleviating hepatic steatosis and sought to determine whether its potential mechanism via the key lysosome-mediated process of lipophagy. Our findings showed that ajugol significantly improved high-fat diet-induced hepatic steatosis in mice and inhibited palmitate-induced lipid accumulation in hepatocytes. Further analysis found that hepatic steatosis promoted the expression of LC3-II, an autophagosome marker, but led to autophagic flux blockade due to a lack of lysosomes. Ajugol also enhanced lysosomal biogenesis and promoted the fusion of autophagosome and lysosome to improve impaired autophagic flux and hepatosteatosis. Mechanistically, ajugol inactivated mammalian target of rapamycin and induced nuclear translocation of the transcription factor EB (TFEB), an essential regulator of lysosomal biogenesis. siRNA-mediated knockdown of TFEB significantly abrogated ajugol-induced lysosomal biogenesis as well as autophagosome-lysosome fusion and lipophagy. We conclude that lysosomal deficit is a critical mediator of hepatic steatosis, and ajugol may alleviate NAFLD via promoting the TFEB-mediated autophagy-lysosomal pathway and lipophagy.