Adipose tissue plays a critical role in defending against metabolic disease by sequestering excess calories and preventing their harmful deposition in ectopic locations. Healthy expansion of adipose occurs via hyperplastic growth, the differentiation of adipocyte progenitor cells (APCs) into new fat cells. The capacity for hyperplastic expansion depends on the fundamental properties of APCs. Prior studies of APCs used narrow identification methods and did not fully characterize the identity and nature of APCs. We used single-cell RNA sequencing to identify distinct types of progenitor cells in murine and human adipose tissue. Functional assessments of these cell types in vitro and in vivo define a mesenchymal cell hierarchy involved in adipocyte formation. We identified several distinct mesenchymal cell types in murine and human adipose. Dipeptidyl peptidase–4–expressing (DPP4+) cells are highly proliferative and multipotent progenitors that are relatively resistant to differentiation into adipocytes. Intercellular adhesion molecule–1–expressing (ICAM1+) cells are committed preadipocytes that express Pparg and are poised to differentiate into mature adipocytes with minimal stimulation. CD142+ cells represent a distinct adipogenic population in murine subcutaneous adipose that shares many properties with ICAM1+ preadipocytes. Computational cell trajectory analyses and in vivo transplantation studies showed that DPP4+ progenitors give rise to both ICAM1+ and CD142+ preadipocytes before differentiation into mature adipocytes. DPP4+ cells depend on transforming growth factor–b signaling to maintain their progenitor identity. Obesity and insulin resistance lead to a depletion of DPP4+ progenitors and a reduction in the adipogenic differentiation competency of APCs in visceral white adipose tissue. Single-cell analysis of human subcutaneous adipose tissue revealed distinct DPP4+ and ICAM1+ populations that displayed functional properties similar to those of the analogous mouse populations. Histological examination of murine subcutaneous adipose tissue showed that ICAM1+ preadipocytes are intercalated between mature adipocytes. The DPP4+ progenitor cells are localized in a previously uncharacterized fibrous niche which surrounds adipose depots, which we term the reticular interstitium. Overall, our studies define the developmental hierarchy of adipose progenitors, describe a new anatomic niche, and lay the groundwork for future therapies targeting one or more of these APC populations.