Homeostatic temperature regulation is fundamental to mammalian physiology and is controlled by acute and chronic responses of local, endocrine and nervous regulators. Here, we report that loss of the heparan sulfate proteoglycan, syndecan-1, causes a profoundly depleted intradermal fat layer, which provides crucial thermogenic insulation for mammals. Mice without syndecan-1 enter torpor upon fasting and show multiple indicators of cold stress, including activation of the stress checkpoint p38α in brown adipose tissue, liver and lung. The metabolic phenotype in mutant mice, including reduced liver glycogen, is rescued by housing at thermoneutrality, suggesting that reduced insulation in cool temperatures underlies the observed phenotypes. We find that syndecan-1, which functions as a facultative lipoprotein uptake receptor, is required for adipocyte differentiation in vitro. Intradermal fat shows highly dynamic differentiation, continuously expanding and involuting in response to hair cycle and ambient temperature. This physiology probably confers a unique role for Sdc1 in this adipocyte sub-type. The PPARγ agonist rosiglitazone rescues Sdc1−/− intradermal adipose tissue, placing PPARγ downstream of Sdc1 in triggering adipocyte differentiation. Our study indicates that disruption of intradermal adipose tissue development results in cold stress and complex metabolic pathology.