Obesity is a direct result of the accumulation of white adipose tissue (WAT). In this study, the role of autophagy in the differentiation of white adipose tissue was studied by deleting the autophagy-related 7 (atg7) gene from adipose tissue in mice. This deletion results in a striking phenotype at the cellular, tissue and whole-organism levels. Adipose tissue deposits in the mutant mice are much smaller in mass than those observed in their wild-type counterparts, and mutant adipocytes exhibit unusual morphological characteristics including multilocular lipid droplets and greatly increased numbers of mitochondria. The knockout mice are noticeably slimmer than their wild-type littermates, despite parity in food and water consumption. The mutant mice also exhibit higher basal physical activity levels and an array of metabolic changes revealed through blood tests. Most importantly, these mice show resistance to high-fat diet-induced obesity and markedly increased sensitivity to insulin. These findings establish a new function for autophagy and provide a new model system for use in the search for treatments for obesity and type II diabetes.