Background: Photosynthetic oleaginous microalgae are considered promising feedstocks for biofuels. The marine microalga, Nannochloropsis oceanica, has been attracting ever-increasing interest because of its fast growth, high triacylglycerol (TAG) content, and available genome sequence and genetic tools. Diacylglycerol acyltransferase (DGAT) catalyzes the last and committed step of TAG biosynthesis in the acyl-CoA-dependent pathway. Previous studies have identified 13 putative DGAT-encoding genes in the genome of N. oceanica, but the functional role of DGAT genes, especially type-I DGAT (DGAT1), remains ambiguous. Results: Nannochloropsis oceanica IMET1 possesses two DGAT1 genes: NoDGAT1A and NoDGAT1B. Functional complementation demonstrated the capability of NoDGAT1A rather than NoDGAT1B to restore TAG synthesis in a TAG-deficient yeast strain. In vitro DGAT assays revealed that NoDGAT1A preferred saturated/monounsaturated acyl-CoAs and eukaryotic diacylglycerols (DAGs) for TAG synthesis, while NoDGAT1B had no detectable enzymatic activity. Assisted with green fluorescence protein (GFP) fusion, fluorescence microscopy analysis indicated the localization of NoDGAT1A in the chloroplast endoplasmic reticulum (cER) of N. oceanica. NoDGAT1A knockdown caused similar to 25% decline in TAG content upon nitrogen depletion, accompanied by the reduced C16:0, C18:0, and C18:1 in TAG sn-1/sn-3 positions and C18: 1 in the TAG sn-2 position. NoDGAT1A overexpression, on the other hand, led to similar to 39% increase in TAG content upon nitrogen depletion, accompanied by the enhanced C16:0 and C18:1 in the TAG sn1/sn-3 positions and C18: 1 in the TAG sn-2 position. Interestingly, NoDGAT1A overexpression also promoted TAG accumulation (by similar to 2.4-fold) under nitrogen-replete conditions without compromising cell growth, and TAG yield of the overexpression line reached 0.49 g L-1 at the end of a 10-day batch culture, 47% greater than that of the control line. Conclusions: Taken together, our work demonstrates the functional role of NoDGAT1A and sheds light on the underlying mechanism for the biosynthesis of various TAG species in N. oceanica. NoDGAT1A resides likely in cER and prefers to transfer C16 and C18 saturated/monounsaturated fatty acids to eukaryotic DAGs for TAG assembly. This work also provides insights into the rational genetic engineering of microalgae by manipulating rate-limiting enzymes such as DGAT to modulate TAG biosynthesis and fatty acid composition for biofuel production.