The relative balance between the quantity of white and brown adipose tissue can profoundly affect lipid storage and whole-body energy homeostasis. However, the mechanisms regulating the formation, expansion, and interconversion of these 2 distinct types of fat remain unknown. Recently, the lysosomal degradative pathway of macroautophagy has been identified as a regulator of cellular differentiation, suggesting that autophagy may modulate this process in adipocytes. The function of autophagy in adipose differentiation was therefore examined in the current study by genetic inhibition of the critical macroautophagy gene autophagy-related 7 (Atg7). Knockdown of Atg7 in 3T3-L1 preadipocytes inhibited lipid accumulation and decreased protein levels of adipocyte differentiation factors. Knockdown of Atg5 or pharmacological inhibition of autophagy or lysosome function also had similar effects. An adipocyte-specific mouse knockout of Atg7 generated lean mice with decreased white adipose mass and enhanced insulin sensitivity. White adipose tissue in knockout mice had increased features of brown adipocytes, which, along with an increase in normal brown adipose tissue, led to an elevated rate of fatty acid, beta-oxidation, and a lean body mass. Autophagy therefore functions to regulate body lipid accumulation by controlling adipocyte differentiation and determining the balance between white and brown fat.