Obesity is associated mainly with adipose cell enlargement in adult man (hypertrophic obesity), whereas the formation of new fat cells (hyperplastic obesity) predominates in the prepubertal age. Adipose cell size, independent of body mass index, is negatively correlated with whole body insulin sensitivity. Here, we review recent findings linking hypertrophic obesity with inflammation and a dysregulated adipose tissue, including local cellular insulin resistance with reduced IRS-1 and GLUT4 protein content. In addition, the number of preadipocytes in the abdominal subcutaneous adipose tissue capable of undergoing differentiation to adipose cells is reduced in hypertrophic obesity. This is likely to promote ectopic lipid accumulation, a well-known finding in these individuals and one that promotes insulin resistance and cardiometabolic risk. We also review recent results showing that TNFα, but not MCP-1, resistin, or IL-6, completely prevents normal adipogenesis in preadipocytes, activates Wnt signaling, and induces a macrophage-like phenotype in the preadipocytes. In fact, activated preadipocytes, rather than macrophages, may completely account for the increased release of chemokines and cytokines by the adipose tissue in obesity. Understanding the molecular mechanisms for the impaired preadipocyte differentiation in the subcutaneous adipose tissue in hypertrophic obesity is a priority since it may lead to new ways of treating obesity and its associated metabolic complications.