We have investigated the role of Rv3097c-encoded lipase (LipY) on the virulence of Mycobacterium tuberculosis. It has been shown that the overexpression of LipY in strain H37Rv induced increase in virulence of recombinant H37Rv::LipY strain. Compared to H37Rv, infection with H37Rv::LipY caused enhanced mortality, weight loss, bacterial load in lungs, splenomegaly, worsening lung morphology and pathology. Mice immunized with recombinant LipY antigen were protected against challenge with H37Rv::LipY, which correlated with enhanced survival of challenged mice and striking decrease in pathological features observed in unimmunized mice. To probe the cause of increase in virulence of H37Rv::LipY, the immune status of the host infected with H37Rv and H37Rv::LipY was compared. It was found that overexpression of LipY compromised immune responses resulting in attenuation of Th1 and Th17 responses, significant increase in IL-10, decrease in number of macrophages and T cells, and increase in numbers of Treg, and DCs in the lungs whereas in mice immunized with LipY an increased pool of T cells and DCs was observed. This led us to conclude that the increase in the virulence of H37Rv::LipY was due to downregulation of the host's protective immunity and the Rv3097c encoded LipY lipase is a virulence factor of M. tuberculosis.