Preadipocytes secrete several WNT family proteins that act through autocrine/paracrine mechanisms to inhibit adipogenesis. The activity of WNT ligands is often decreased by secreted frizzled-related proteins (SFRPs). Sfrp5 is strongly induced during adipocyte differentiation and increases in adipocytes during obesity, presumably to counteract WNT signaling. We tested the hypothesis that obesity-induced Sfrp5 expression promotes the development of new adipocytes by inhibiting endogenous suppressors of adipogenesis. As predicted, mice that lack functional SFRP5 were resistant to diet-induced obesity. However, counter to our hypothesis, we found that adipose tissue of SFRP5-deficient mice had similar numbers of adipocytes, but a reduction in large adipocytes. Transplantation of adipose tissue from SFRP5-deficient mice into leptin receptor–deficient mice indicated that the effects of SFRP5 deficiency are tissue-autonomous. Mitochondrial gene expression was increased in adipose tissue and cultured adipocytes from SFRP5-deficient mice. In adipocytes, lack of SFRP5 stimulated oxidative capacity through increased mitochondrial activity, which was mediated in part by PGC1α and mitochondrial transcription factor A. WNT3a also increased oxygen consumption and the expression of mitochondrial genes. Thus, our findings support a model of adipogenesis in which SFRP5 inhibits WNT signaling to suppress oxidative metabolism and stimulate adipocyte growth during obesity.