Dengue virus is responsible for the highest rates of disease and mortality among the members of the Flavivirus genus. Dengue epidemics are still occurring around the world, indicating an urgent need of prophylactic vaccines and antivirals. In recent years, a great deal has been learned about the mechanisms of dengue virus genome amplification. However, little is known about the process by which the capsid protein recruits the viral genome during encapsidation. Here, we found that the mature capsid protein in the cytoplasm of dengue virus infected cells accumulates on the surface of ER-derived organelles named lipid droplets. Mutagenesis analysis using infectious dengue virus clones has identified specific hydrophobic amino acids, located in the center of the capsid protein, as key elements for lipid droplet association. Substitutions of amino acid L50 or L54 in the capsid protein disrupted lipid droplet targeting and impaired viral particle formation. We also report that dengue virus infection increases the number of lipid droplets per cell, suggesting a link between lipid droplet metabolism and viral replication. In this regard, we found that pharmacological manipulation of the amount of lipid droplets in the cell can be a means to control dengue virus replication. In addition, we developed a novel genetic system to dissociate cis-acting RNA replication elements from the capsid coding sequence. Using this system, we found that mislocalization of a mutated capsid protein decreased viral RNA amplification. We propose that lipid droplets play multiple roles during the viral life cycle; they could sequester the viral capsid protein early during infection and provide a scaffold for genome encapsidation.