The hearts of many mammalian species are surrounded by an extensive layer of fat called epicardial adipose tissue (EAT). The lineage origins and determinative mechanisms of EAT development are unclear, in part because mice and other experimentally tractable model organisms are thought to not have this tissue. In this study, we show that mouse hearts have EAT, localized to a specific region in the atrial–ventricular groove. Lineage analysis indicates that this adipose tissue originates from the epicardium, a multipotent epithelium that until now is only established to normally generate cardiac fibroblasts and coronary smooth muscle cells. We show that adoption of the adipocyte fate in vivo requires activation of the peroxisome proliferator activated receptor gamma (PPARγ) pathway, and that this fate can be ectopically induced in mouse ventricular epicardium, either in embryonic or adult stages, by expression and activation of PPARγ at times of epicardium–mesenchymal transformation. Human embryonic ventricular epicardial cells natively express PPARγ, which explains the abundant presence of fat seen in human hearts at birth and throughout life.