Mesencephalic astrocyte-derived neurotrophic factor (MANF) is an endoplasmic reticulum (ER) protein that can be secreted and protects dopamine neurons and cardiomyocytes from ER stress and apoptosis. The mechanism of action of extracellular MANF has long been elusive. From a genetic screen for mutants with abnormal ER stress response, we identified the gene Y54G2A.23 as the evolutionarily conserved C. elegans MANF orthologue. We find that MANF binds to the lipid sulfatide, also known as 3-O-sulfogalactosylceramide present in serum and outer-cell membrane leaflets, directly in isolated forms and in reconstituted lipid micelles. Sulfatide binding promotes cellular MANF uptake and cytoprotection from hypoxia-induced cell death. Heightened ER stress responses of MANF-null C. elegans mutants and mammalian cells are alleviated by human MANF in a sulfatide-dependent manner. Our results demonstrate conserved roles of MANF in sulfatide binding and ER stress response, supporting sulfatide as a long-sought lipid mediator of MANF's cytoprotection.