Ursodeoxycholyl lysophosphatidylethanolamide (UDCA-LPE) is a hepatoprotectant in inhibiting apoptosis, inflammation, and hyperlipidemia in mouse models of nonalcoholic steatohepatitis (NASH). We studied the ability of UDCA-LPE to inhibit palmitate (Pal)-induced apoptosis in primary hepatocytes and delineate cytoprotective mechanisms. We showed that lipoprotection by UDCA-LPE was mediated by cAMP and was associated with increases in triglycerides (TGs) and phospholipids (PLs). An inhibitor of cAMP-effector protein kinase A partially reversed the protective effects of UDCA-LPE. Lipidomic analyses of fatty acids and PL composition revealed a shift of lipid metabolism from saturated Pal to monounsaturated and polyunsaturated fatty acids, mainly, oleate, docosapentaenoate, and docosahexaenoate. The latter two ω-3 fatty acids were particularly found in phosphatidylcholine and phosphatidylserine pools. The catalysis of Pal by stearoyl-CoA desaturase-1 (SCD-1) is a known mechanism for the channeling of Pal away from apoptosis. SCD-1 protein was upregulated during UDCA-LPE lipoprotection. SCD-1 knockdown of Pal-treated cells showed further increased apoptosis, and the extent of UDCA-LPE protection was reduced. Thus, the major mechanism of UDCA-LPE lipoprotection involved a metabolic shift from toxic saturated toward cytoprotective unsaturated fatty acids in part via SCD-1. UDCA-LPE may thus be a therapeutic agent for treatment of NASH by altering distinct pools of fatty acids for storage into TGs and PLs, and the latter may protect lipotoxicity at the membrane levels.