Lipolysis in white adipose tissue (WAT) provides fatty acids as energy substrates for thermogenesis to increase energy expenditure. Syndecan-4 (Sdc4) is a transmembrane proteoglycan bearing heparan sulfate chains. Although single nucleotide polymorphisms (SNPs) of the Sdc4 gene have been identified linking to metabolic syndromes, its specific function in adipose tissue remains obscure. Here, we show that Sdc4 serves as a regulator of lipid metabolism and adaptive thermogenesis. Sdc4 expression and shedding are elevated in the WAT of diet-induced obese mice. Adipocyte-specific deletion of Sdc4 promotes lipolysis and WAT browning, thereby raising whole-body energy expenditure to protect against diet-induced obesity. Mechanistically, fibroblast growth factor 2 (FGF2) is a paracrine factor that maintains energy homeostasis. Elevated shed Sdc4 concentrates and delivers FGF2 to fibroblast growth factor receptor 1 (FGFR1) on adipocytes, which in turn suppresses lipolysis by reducing hormone-sensitive lipase (HSL) activity, thus exaggerating adipose tissue dysfunction upon high-fat diet induction. Sdc4-deficient adipocytes show higher lipolytic and thermogenic capacity by enhancing HSL phosphorylation and UCP1 expression. Overall, our study reveals that adipocyte-derived shed Sdc4 is a novel suppressor of lipolysis, contributing to decreased energy expenditure, thus exaggerating obesity. Targeting shed Sdc4 is a potential therapeutic strategy for obesity.