Defective control of lipid metabolism leading to lipotoxicity causes insulin resistance in skeletal muscle, a major factor leading to diabetes. Here, we demonstrate that perilipin (PLIN) 5 is required to couple intramyocellular triacylglycerol lipolysis with the metabolic demand for fatty acids. PLIN5 ablation depleted triacylglycerol stores but increased sphingolipids including ceramide, hydroxylceramides and sphingomyelin. We generated perilipin 5 (Plin5)(-/-) mice to determine the functional significance of PLIN5 in metabolic control and insulin action. Loss of PLIN5 had no effect on body weight, feeding or adiposity but increased whole-body carbohydrate oxidation. Plin5 (-/-) mice developed skeletal muscle insulin resistance, which was associated with ceramide accumulation. Liver insulin sensitivity was improved in Plin5 (-/-) mice, indicating tissue-specific effects of PLIN5 on insulin action. We conclude that PLIN5 plays a critical role in coordinating skeletal muscle triacylglycerol metabolism, which impacts sphingolipid metabolism, and is requisite for the maintenance of skeletal muscle insulin action.