Carboxyl ester lipase (bile salt-stimulated lipase) is a pancreatic enzyme capable of hydrolyzing esters of cholesterol and fat-soluble vitamins. It also efficiently digests triglycerides (TG) into free fatty acids and glycerol and is abundant in the milk of humans and several other species. We used the mouse as a model to test the hypothesis that milk-derived carboxyl ester lipase (CEL) digests milk TG and that without its activity milk lipids and their digestion intermediates can disrupt the intestinal epithelium of neonates. CEL protein and enzymatic activity were shown to be abundant in mouse milk. After 24-h administration of the CEL-specific inhibitor, WAY-121,751-5, the small intestines of treated and control neonates were analyzed histologically for signs of fat malabsorption and injury to their villus epithelium. In vehicle-fed controls, TG were digested and absorbed in the duodenum and jejunum, whereas, in inhibitor-fed littermates, large intracellular neutral lipid droplets accumulated in enterocytes of the ileum, resulting in damage to the villus epithelium. Similar results were observed in neonates nursed by CEL knockout females compared with heterozygous controls. The results suggest that lack of CEL activity causes incomplete digestion of milk fat and lipid accumulation by enterocytes in the ileum of neonatal mice.