Dietary saturated fats have often been implicated in the promotion of obesity and related disorders. It has been shown recently that saturated fats act through the transcription factor SREBP-1c (sterol regulatory element-binding protein-1c) and its requisite coactivator, peroxisome proliferator-activated receptor-gamma coactivator-1beta (PGC-1beta), to exert their pro-lipogenic effects. We show here that a diet high in the saturated fat stearate induces lipogenic genes in wild-type mice, with the induction of the Scd1 (stearoyl-CoA desaturase-1) gene preceding that of other lipogenic genes. However, in Scd1-/- mice, stearate does not induce lipogenesis, and Srebp-1c and Pgc-1beta levels are markedly reduced. Instead, genes of fatty acid oxidation such as Cpt-1 (carnitine palmitoyltransferase-1) as well as Pgc-1alpha are induced. Mitochondrial fatty acid oxidation is increased, and white adipose tissue and hepatic glycogen stores are depleted in stearate-fed Scd1-/- mice. Furthermore, AMP-activated protein kinase is also induced by stearate feeding in Scd1-/- mice. These results indicate that the desaturation of saturated fats such as stearate by SCD is an essential step mediating their induction of lipogenesis. In the absence of SCD1, stearate promotes oxidation, leading to protection from saturated fat-induced obesity. SCD1 thus serves as a molecular switch in the promotion or prevention of lipid-induced disorders brought on by consumption of excess saturated fat.