Abstract Lipid droplets (LDs) stored during seed development are mobilized and provide essential energy and lipids to support seedling growth upon germination. Triacylglycerols (TAGs) are the main neutral lipids stored in LDs. The lipase SUGAR DEPENDENT 1 (SDP1), which hydrolyzes TAGs in Arabidopsis thaliana, is localized on peroxisomes and traffics to the LD surface through peroxisomal extension, but the underlying mechanism remains elusive. Here, we report a previously unknown function of a plant-unique endosomal sorting complex required for transport (ESCRT) component FYVE DOMAIN PROTEIN REQUIRED FOR ENDOSOMAL SORTING 1 (FREE1) in regulating peroxisome/SDP1-mediated LD turnover in Arabidopsis. We showed that LD degradation was impaired in germinating free1 mutant; moreover, the tubulation of SDP1- or PEROXIN 11e (PEX11e)-marked peroxisomes and the migration of SDP1-positive peroxisomes to the LD surface were altered in the free1 mutant. Electron tomography analysis showed that peroxisomes failed to form tubules to engulf LDs in free1, unlike in the wild-type. FREE1 interacted directly with both PEX11e and SDP1, suggesting that these interactions may regulate peroxisomal extension and trafficking of the lipase SDP1 to LDs. Taken together, our results demonstrate a pivotal role for FREE1 in LD degradation in germinating seedlings via regulating peroxisomal tubulation and SDP1 targeting.