Liposarcoma is an often fatal cancer of fat cells. Mechanisms of liposarcoma development are incompletely understood. The cleavage of fatty acids from acylglycerols (lipolysis) has been implicated in cancer. We generated mice with adipose tissue deficiency of two major enzymes of lipolysis, adipose triglyceride lipase (ATGL) and hormone-sensitive lipase (HSL), encoded respectively by Pnpla2 and Lipe. Adipocytes from double adipose knockout (DAKO) mice, deficient in both ATGL and HSL, showed near-complete deficiency of lipolysis. All DAKO mice developed liposarcoma between 11 and 14 months of age. No tumors occurred in single knockout or control mice. The transcriptome of DAKO adipose tissue showed marked differences from single knockout and normal controls as early as 3 months. Gpnmb and G0s2 were among the most highly dysregulated genes in premalignant and malignant DAKO adipose tissue, suggesting a potential utility as early markers of the disease. Similar changes of GPNMB and G0S2 expression were present in a human liposarcoma database. These results show that a previously-unknown, fully penetrant epistatic interaction between Pnpla2 and Lipe can cause liposarcoma in mice. DAKO mice provide a promising model for studying early premalignant changes that lead to late-onset malignant disease.