Fatty acid amide hydrolase (FAAH) knockout mice are prone to excess energy storage and adiposity, whereas mutations in FAAH are associated with obesity in humans. However, the molecular mechanism by which FAAH affects energy expenditure (EE) remains unknown. Here we show that reduced energy expenditure in FAAH^−/− mice could be attributed to decreased circulating triiodothyronine and thyroxine concentrations secondary to reduced mRNA expression of both pituitary thyroid-stimulating hormone and hypothalamic thyrotropin-releasing hormone. These reductions in the hypothalamic-pituitary-thyroid axis were associated with activation of hypothalamic peroxisome proliferating-activated receptor γ (PPARγ), and increased hypothalamic deiodinase 2 expression. Infusion of NAEs (anandamide and palmitoylethanolamide) recapitulated increases in PPARγ-mediated decreases in EE. FAAH^−/− mice were also prone to diet-induced hepatic insulin resistance, which could be attributed to increased hepatic diacylglycerol content and protein kinase Cε activation. Our data indicate that FAAH deletion, and the resulting increases in NAEs, predispose mice to ectopic lipid storage and hepatic insulin resistance by promoting centrally mediated hypothyroidism.