Apart from its role during labor and lactation, oxytocin is involved in several other functions. Interestingly, oxytocin- and oxytocin receptor-deficient mice develop late-onset obesity with normal food intake, suggesting that the hormone might exert a series of beneficial metabolic effects. This was recently confirmed by data showing that central oxytocin infusion causes weight loss in diet-induced obese mice. The aim of the present study was to unravel the mechanisms underlying such beneficial effects of oxytocin. Chronic central oxytocin infusion was carried out in high fat diet-induced obese rats. Its impact on body weight, lipid metabolism and insulin sensitivity was determined. We observed a dose-dependent decrease in body weight gain, increased adipose tissue lipolysis and fatty acid β-oxidation, as well as reduced glucose intolerance and insulin resistance. The additional observation that plasma oxytocin levels increased upon central infusion suggested that the hormone might affect adipose tissue metabolism by direct action. This was demonstrated using in vitro, ex vivo, as well as in vivo experiments. With regard to its mechanism of action in adipose tissue, oxytocin increased the expression of stearoyl-coenzyme A desaturase 1, as well as the tissue content of the phospholipid precursor, N-oleoyl-phosphatidylethanolamine, the biosynthetic precursor of the oleic acid-derived PPAR-alpha activator, oleoylethanolamide. Because PPAR-alpha regulates fatty acid β-oxidation, we hypothesized that this transcription factor might mediate the oxytocin effects. This was substantiated by the observation that, in contrast to its effects in wild-type mice, oxytocin infusion failed to induce weight loss and fat oxidation in PPAR-alpha-deficient animals. Altogether, these results suggest that oxytocin administration could represent a promising therapeutic approach for the treatment of human obesity and type 2 diabetes.