Obesity is endemic to many developed countries. Overweight or obesity is associated with an increased risk of developing cancer. Dysfunctional adipose tissue alters cancer cell proliferation and migration; however, whether and how neoplastic epithelial cells communicate with adipose tissue and the underlying mechanism are less clear. BTG3 is a member of the anti-proliferative BTG/Tob family and functions as a tumor suppressor. Here, we demonstrated that BTG3 levels are downregulated in basal cell carcinoma and squamous cell carcinoma compared to normal skin tissue, and Btg3 knockout in mice augmented the development of papilloma in a mouse model of DMBA/TPA-induced skin carcinogenesis. Mechanistically, BTG3-knockout keratinocytes promoted adipocyte differentiation mainly through the release of IL1α, IL10, and CCL4, as a result of elevated NF-κB activity. These adipocytes produced CCL20 and FGF7 in a feedback loop to promote keratinocyte migration. Thus, our findings showcased the role of BTG3 in guarding the interplay between keratinocytes and adjacent adipocytes, and identified the underlying neoplastic molecular mediators that may serve as possible targets in the treatment of skin cancer.