Although perilipin 2 (Plin2) has been shown to bind lipids with high affinity, the Plin2 lipid binding site has yet to be defined. This is of interest since Plin2's affinity for lipids has been suggested to be important for lipid droplet biogenesis and intracellular triacylglycerol accumulation. To define these regions, mouse Plin2 and several deletion mutants expressed as recombinant proteins and in mammalian cells were assessed by molecular modeling, fluorescence binding, circular dichroic, and fluorescence resonance energy transfer techniques to identify the structural and functional requirements for lipid binding. Major findings of this study indicate (1) the N-terminal PAT domain does not bind cholesterol or stearic acid; (2) Plin2 residues 119-251, containing helix α4, the α-β domain, and part of helix α6 form a Plin3-like cleft found to be important for highest affinity lipid binding; (3) both stearic acid and cholesterol interact favorably with the Plin2 cleft formed by conserved residues in helix α6 and adjacent strands, which is common to all the active lipid-binding constructs; and (4) discrete targeting of the Plin2 mutants to lipid droplets supports Plin2 containing two independent, nonoverlapping lipid droplet targeting domains in its central and C-terminal sequences. Thus, the current work reveals specific domains responsible for Plin2-lipid interactions that involves the protein's lipid binding and targeting functions.