Collagen XVIII is an evolutionary conserved ubiquitously expressed basement membrane proteoglycan produced in three isoforms via two promoters (P). Here, we assess the function of the N-terminal, domain of unknown function/frizzled-like sequences unique to medium/long collagen XVIII by creating P-specific null mice. P2-null mice, which only produce short collagen XVIII, developed reduced bulk-adiposity, hepatic steatosis, and hypertriglyceridemia. These abnormalities did not develop in P1-null mice, which produce medium/long collagen XVIII. White adipose tissue samples from P2-null mice contain larger reserves of a cell population enriched in early adipocyte progenitors; however, their embryonic fibroblasts had ∼50% lower adipocyte differentiation potential. Differentiating 3T3-L1 fibroblasts into mature adipocytes produced striking increases in P2 gene-products and dramatic falls in P1-transcribed mRNA, whereas Wnt3a-induced dedifferentiation of mature adipocytes produced reciprocal changes in P1 and P2 transcript levels. P2-derived gene-products containing frizzled-like sequences bound the potent adipogenic inhibitor, Wnt10b, in vitro. Previously, we have shown that these same sequences bind Wnt3a, inhibiting Wnt3a-mediated signaling. P2-transcript levels in visceral fat were positively correlated with serum free fatty acid levels, suggesting that collagen α1 (XVIII) expression contributes to regulation of adipose tissue metabolism in visceral obesity. Medium/long collagen XVIII is deposited in the Space of Disse, and interaction between hepatic apolipoprotein E and this proteoglycan is lost in P2-null mice. These results describe a previously unidentified extracellular matrix-directed mechanism contributing to the control of the multistep adipogenic program that determines the number of precursors committing to adipocyte differentiation, the maintenance of the differentiated state, and the physiological consequences of its impairment on ectopic fat deposition.