Abstract Testosterone (T) reduces male fat mass, but the underlying mechanisms remain elusive, limiting its clinical relevance in hypogonadism-associated obesity. Here, we subjected chemically castrated high-fat diet–induced adult obese male mice to supplementation with T or the nonaromatizable androgen dihydrotestosterone (DHT) for 20 weeks. Both hormones increased lean mass, thereby indirectly increasing oxygen consumption and energy expenditure. In addition, T but not DHT decreased fat mass and increased ambulatory activity, indicating a role for aromatization into estrogens. Investigation of the pattern of aromatase expression in various murine tissues revealed the absence of Cyp19a1 expression in adipose tissue while high levels were observed in brain and gonads. In obese hypogonadal male mice with extrahypothalamic neuronal estrogen receptor alpha deletion (N-ERαKO), T still increased lean mass but was unable to decrease fat mass. The stimulatory effect of T on ambulatory activity was also abolished in N-ERαKO males. In conclusion, our work demonstrates that the fat-burning action of T is dependent on aromatization into estrogens and is at least partially mediated by the stimulation of physical activity via extrahypothalamic ERα signaling. In contrast, the increase in lean mass upon T supplementation is mediated through the androgen receptor and indirectly leads to an increase in energy expenditure, which might also contribute to the fat-burning effects of T.