Stearoyl-CoA desaturase (SCD) catalyzes the rate-limiting step in the biosynthesis of monounsaturated fatty acids. Mice with a targeted disruption of the SCD1 isoform have reduced body adiposity, increased energy expenditure, and up-regulated expression of several genes encoding enzymes of fatty acid β-oxidation in liver. The mechanisms by which SCD deficiency leads to these metabolic changes are presently unknown. Here we show that the phosphorylation and activity of AMP-activated protein kinase (AMPK), a metabolic sensor that regulates lipid metabolism during increased energy expenditure is significantly increased (≈40%, P < 0.01) in liver of SCD1 knockout mice (SCD1-/-). In parallel with the activation of AMPK, the phosphorylation of acetyl-CoA carboxylase at Ser-79 was increased and enzymatic activity was decreased (≈35%, P < 0.001), resulting in decreased intracellular levels of malonyl-CoA (≈47%, P < 0.001). An SCD1 mutation also increased AMPK phosphorylation and activity and increased acetyl-CoA carboxylase phosphorylation in leptin-deficient ob/ob mice. Lower malonyl-CoA concentrations are known to derepress carnitine palmitoyltransferase 1 (CPT1). In SCD1-/- mice, CPT1 and CPT2 activities were significantly increased (in both cases ≈60%, P < 0.001) thereby stimulating the oxidation of mitochondrial palmitoyl-CoA. Our results identify AMPK as a mediator of increased fatty acid oxidation in liver of SCD1-deficient mice.