Cancer-associated adipocytes (CAAs) reprogram metabolic status of tumor microenvironment (TME). The metabolic crosstalk between CAAs and CD8+T cells in TME remains unclear. Here we report that CAAs undergo lipolysis, releasing free fatty acids that promote lipid peroxidation and disturb mitochondrial homeostasis in CD8+T cells, leading to their functional exhaustion. Importantly, we uncover that fibroblast growth factor 21 (FGF21) autocrinally drives CAA lipolysis through upregulating adipose triglyceride lipase (ATGL) via FGFR1/KLB-p38 signaling. FGF21 deletion in adipose tissue or ATGL inhibition impedes CAA lipolysis, mitigates lipid peroxidation, normalizes mitochondrial dynamics of CD8+T cells, and restores their effector function, consequently blunting tumor growth. Moreover, combining ATGL inhibitor with anti-PD-1 therapy synergistically enhances the antitumor activity of CD8+T cells, yielding greater therapeutic efficacy. Our findings highlight the pivotal role of CAA lipolysis in CD8+T cell dysfunction within TME, suggesting that targeting CAA lipolysis represents a valuable avenue for improving cancer immunotherapy.