Rhabdomyosarcoma (RMS) is a rare pediatric soft tissue sarcoma originating from skeletal muscle progenitors that fail to fully differentiate, leading to aggressive tumor growth. Through a genetic screen in Drosophila, we identified Ifc, the orthologue of DEGS1, as a novel regulator of muscle stem cells (MuSCs). Ifc/DEGS1 catalyzes the conversion of dihydroceramide to ceramide—a critical step in sphingolipid metabolism. In Drosophila, Ifc overexpression expanded MuSC-like populations and impaired differentiation, recapitulating key features of RMS. Likewise, DEGS1 is upregulated in human RMS, where it drives proliferation and tumorigenesis. Lipidomic profiling revealed that DEGS1 disrupts lipid homeostasis by activating mTORC1 and impairing lipophagy—the autophagic degradation of lipid droplets—thereby promoting tumor progression. Importantly, both genetic and pharmacological inhibition of DEGS1 restored lipophagy and significantly suppressed tumor growth. These findings, uncovered through a cross-species approach, identify DEGS1-mediated disruption of lipophagy and sphingolipid metabolism as central drivers of RMS pathogenesis and position DEGS1 as a promising therapeutic target.