Mammalian pre-implantation embryos accumulate substantial lipids, which are stored in lipid droplets (LDs). Despite the fundamental roles of lipids in many cellular functions, the significance of building-up LDs for the developing embryo remains unclear. Here we report that the accumulation and mobilization of LDs upon implantation are causal in the morphogenesis of the pluripotent epiblast and generation of the pro-amniotic cavity in mouse embryos, a critical step for all subsequent development. We show that the CIDEA protein, found abundantly in adipocytes, enhances lipid storage in blastocysts and pluripotent stem cells by promoting LD enlargement through fusion. The LD-stored lipids are mobilized into lysosomes at the onset of lumenogenesis, but without CIDEA are prematurely degraded by cytosolic lipases. Loss of lipid storage or inactivation of lipophagy leads to the aberrant formation of multiple cavities within disorganised epithelial structures. Thus, our study reveals an unexpected role for LDs in orchestrating tissue remodelling and uncovers underappreciated facets of lipid metabolism in peri-implantation development.