Most cells store neutral lipids in a dedicated compartment, the lipid droplet (LD). These LDs are structurally and functionally conserved across species. In higher eukaryotes, LDs are covered by abundant scaffolding proteins, such as the oleosins in plants and perilipins (PLINs) in animal cells. Saccharomyces cerevisiae, however, has no homologues of these scaffolding proteins. To analyze a possible function of these proteins in the biogenesis of LDs, oleosin and perilipin family members (PLIN1, ADRP/PLIN2 and TIP47/PLIN3) were expressed in yeast cells and their targeting to LDs, membrane association and function in neutral lipid homeostasis and LD biogenesis were analyzed. When expressed in wild-type cells, these proteins were properly targeted to LDs. However, when expressed in cells lacking LDs, oleosin was localized to the ER bilayer and was rapidly degraded. PLINs, on the other hand, did not localize to the ER membrane in the absence of LDs and lost their membrane association. Photobleaching experiments revealed that PLIN2 and PLIN3 rapidly exchanged their LD association, but PLINs did not move as quickly as integral membrane proteins, such as oleosin, over the LD surface. Interestingly, expression of these scaffolding LD proteins in mutant cells containing elevated levels of neutral lipids within the ER bilayer resulted in the formation of LDs. These results suggest that these LD scaffolding proteins promote the sequestration of neutral lipids from the ER bilayer and thereby induce LD formation. Consistent with this proposition, addition of a cell-permeable diacylglycerol (DAG) was sufficient to promote LD formation in cells expressing the LD scaffolding proteins but lacking the capacity to synthesize storage lipids.