Mammalian acyl-CoA thioesterases (Acots) catalyze the hydrolysis of fatty acyl-CoAs to form free fatty acids plus CoA, but their metabolic functions remain undefined. Thioesterase superfamily member 1 (Them1; synonyms Acot11, StarD14, and brown fat inducible thioesterase) is a long-chain fatty acyl-CoA thioesterase that is highly expressed in brown adipose tissue and is regulated by both ambient temperature and food consumption. Here we show that Them1(-/-) mice were resistant to diet-induced obesity despite greater food consumption. Them1(-/-) mice exhibited increased O(2) consumption and heat production, which were accompanied by increased rates of fatty acid oxidation in brown adipose tissue and up-regulation of genes that promote energy expenditure. Them1(-/-) mice were also protected against diet-induced inflammation in white adipose tissue, as well as hepatic steatosis, and demonstrated improved glucose homeostasis. The absence of Them1 expression in vivo and in cell culture led to markedly attenuated diet- or chemically induced endoplasmic reticulum stress responses, providing a mechanism by which Them1 deficiency protects against insulin resistance and lipid deposition. Taken together, these data suggest that Them1 functions to decrease energy consumption and conserve calories. In the setting of nutritional excess, the overproduction of free fatty acids by Them1 provokes insulin resistance that is associated with inflammation and endoplasmic reticulum stress.