Acyl CoA:diacylglycerol acyltransferase (DGAT) is a ubiquitously expressed enzyme that catalyzes the final reaction in the major pathways of triglyceride synthesis. Mice lacking DGAT1 (Dgat^–/–) demonstrate significant changes in lipid metabolism in several tissues, including the skin. Here we report the effects of DGAT1 deficiency on fur and sebaceous glands. Adult Dgat^–/– mice had dry fur and hair loss, which were associated with atrophic sebaceous glands and fur lipid abnormalities. As a result, Dgat^–/– mice had impaired water repulsion and defective thermoregulation after water immersion. These phenotypes were mostly absent in Dgat^–/– mice with leptin deficiency, indicating an unexpected role for leptin in modulating the skin phenotype. Our findings indicate that DGAT1 plays an important role in normal fur and sebaceous gland physiology and provide evidence that leptin modulates these processes in the skin.