Adipose tissue is an important metabolic organ, the dysfunction of which is associated with the development of obesity, diabetes mellitus, and cardiovascular disease. The nuclear receptor peroxisome proliferator-activated receptor gamma (PPARγ) is considered the master regulator of adipocyte differentiation and function. Although its cell-autonomous role in adipogenesis has been clearly demonstrated in cell culture, previous fat-specific knockouts of the murine PPARγ gene did not demonstrate a dramatic phenotype in vivo. Here, using Adipoq–Cre mice to drive adipose-specific recombination, we report a unique fat-specific PPARγ knockout (PPARγ FKO) mouse model with almost no visible brown and white adipose tissue at age 3 mo. As a consequence, PPARγ FKO mice had hugely enlarged pancreatic islets, massive fatty livers, and dramatically elevated levels of blood glucose and serum insulin accompanied by extreme insulin resistance. PPARγ FKO mice also exhibited delayed hair coat formation associated with absence of dermal fat, disrupted mammary gland development with loss of mammary fat pads, and high bone mass with loss of bone marrow fat, indicating the critical roles of adipose PPARγ in these tissues. Together, our data reveal the necessity of fat PPARγ in adipose formation, whole-body metabolic homeostasis, and normal development of fat-containing tissues.