Increased oxidative stress in adipose tissue emerges as an inducer of obesity-linked insulin resistance. Here we tested whether free-radical derived oxysterols are formed by, and accumulate in, human adipocytes. Moreover, we asked whether increased accumulation of oxysterols characterizes the adipose cells of obese patients with type 2 diabetes (T2D) (OBT2D) compared with lean, nondiabetic controls (CTRLs). Finally, we studied the effects of the free radical-derived oxysterols on adipogenic differentiation of adipose-derived stem cells (ASCs). Adipocytes and ASCs were isolated from sc abdominal adipose tissue biopsy in four OBT2D and four CTRL subjects. Oxysterols in adipocytes were detected by gas chromatography/mass spectrometry. The cellular and molecular effects of oxysterols were then evaluated on primary cultures of ASCs focusing on cell viability, adipogenic differentiation, and "canonical" WNT and MAPK signaling pathways. 7-ketocholesterol (7κ-C) and 7β-hydroxycholesterol were unambiguously detected in adipocytes, which showed higher oxysterol accumulation (P < .01) in OBT2D, as compared with CTRL individuals. Notably, the accumulation of oxysterols in adipocytes was predicted by the adipose cell size of the donor (R2 = 0.582; P < .01). Challenging ASCs with free radical-derived type I (7κ-C) and type II (5,6-Secosterol) oxysterols led to a time- and concentration-dependent decrease of cell viability. Meaningfully, at a non-toxic concentration (1μM), these bioactive lipids hampered adipogenic differentiation of ASCs by sequential activation of WNT/β-catenin, p38-MAPK, ERK1/2, and JNK signaling pathways. Free radical-derived oxysterols accumulate in the "diabetic" fat and may act as novel adipokines modulating the adipogenic potential of undifferentiated adipose precursor cells.