Type 2 diabetes (T2D) is a complex disease that represents a major global public health threat. A key risk factor in the development of T2D is impairment in lipolysis. Lipolysis is a metabolic pathway that regulates energy homeostasis through degradation of intracellular triacylglyceride (TAG) and release of fatty acids for use as energy substrates or lipid mediators in cellular processes. We report identification of a novel 19-base pair deletion in the human LIPE gene, which encodes hormone sensitive lipase (HSL), a key lipolytic enzyme for diacylglyceride (DAG) hydrolysis. This deletion results in absence of HSL protein and is associated with dyslipidemia and T2D. Absence at the level of the adipose tissue of HSL results in major impairment of lipolysis and alteration in expression of downstream target genes of nuclear receptors like peroxisome proliferator-activated receptor-gamma (PPARG). Characterization of the first human HSL knockout revealed a novel role for HSL in the regulation of adipose tissue adipogenesis and function, and highlights the serious metabolic consequences of a lipid storage defect.