Mutations in 1-acylglycerol-3-phosphate-O-acyltransferase 2 (AGPAT2) cause congenital generalized lipodystrophy. To understand the molecular mechanisms underlying the metabolic complications associated with AGPAT2 deficiency, Agpat2 null mice were generated. Agpat2^−/− mice develop severe lipodystrophy affecting both white and brown adipose tissue, extreme insulin resistance, diabetes, and hepatic steatosis. The expression of lipogenic genes and rates of de novo fatty acid biosynthesis were increased ∼4-fold in Agpat2^−/− mouse livers. The mRNA and protein levels of monoacylglycerol acyltransferase isoform 1 were markedly increased in the livers of Agpat2^−/− mice, suggesting that the alternative monoacylglycerol pathway for triglyceride biosynthesis is activated in the absence of AGPAT2. Feeding a fat-free diet reduced liver triglycerides by ∼50% in Agpat2^−/− mice. These observations suggest that both dietary fat and hepatic triglyceride biosynthesis via a monoacylglycerol pathway may contribute to hepatic steatosis in Agpat2^−/− mice.