The CIDEC protein is located in lipid droplets (LDs) and the endoplasmic reticulum (ER) and is induced in fat deposition. However, the binding domain, the functional domain and the underlying mechanism of CIDEC in stimulating lipid accumulation remain unclear. Here, we investigated the subcellular localization and function of pig CIDEC and confirmed CIDEC promotes unilocular development of LDs, reduces the specific surface area (SSA) of LDs and stimulates lipid accumulation in HepG2 cells. By analyzing a series of CIDEC mutants, we showed the N‐domain (1–173 amino acid) is involved in LD localization and the C‐domain (174–238 amino acid) is necessary for LD fusion. Further analysis indicated that the 106–173 amino acid region includes an ER‐binding domain. Moreover, CIDEC stayed in the ER under lipid‐deficient conditions and translocated to LDs under fatty acid stimulation suggesting that localization of CIDEC in the ER is before the LD. Our data indicated additional fatty acids stimulated hepatic CIDEC expression and an increasing level of CIDEC induced hepatic LD fusion and lipid accumulation. Our work suggests that CIDEC protects LDs by decreasing the SSA of LDs and is involved in the regulation of hepatic lipid deposition.