Metabolic health requires efficient storage and release of lipids by adipocytes. Obesity increases both the immune cell content of adipose tissue (AT) and the release by adipocytes of triglyceride (TG)-rich extracellular vesicles (AdExos). While the systemic regulation of adipocytes and lipid flux into and out of AT are well understood, the local regulation and homeostasis of lipid in AT is not. We found that AdExos are captured by adipose tissue macrophages (ATMs) where their lipid is hydrolyzed by lysosomes to yield free fatty acids (FFA), which requires lysosomal acid lipase (encoded by Lipa). Lipa deficiency leads to severe hepatic steatosis and liver failure in patients. We noted that, in mice lacking Lipa, there is also AT atrophy. To explain these and other data, we propose a local lipid cycle in AT that is necessary to maintain fat and systemic lipid homeostasis. In this model, FFAs are released from AdExo digestion in ATMs and the FFAs are taken back up into adipocytes for re-esterification. While seemingly futile, an analogous calcium/phosphate cycle, mediated by bone macrophages, is necessary for healthy mineralized bone. Our model predicts that myeloid-specific expression would rescue the Lipa-deficient AT phenotype. To test this hypothesis, we expressed Lipa only in myeloid cells, which completely rescued the fat phenotype and significantly rescued the liver phenotype. These data support a central role of macrophage Lipa in local and whole-body lipid metabolism.