Researchers have long endeavored to produce modified fatty acids in easily managed crop plants where they are not natively found. An important step toward this goal has been biosynthesis of these valuable products in model oilseeds. The successful production of such fatty acids has revealed barriers to broad application of this technology, including low seed oil and low proportion of the introduced fatty acid. An additional barrier, rarely examined in the literature, is reduced seed vigor. Here, we analyze the impact on seedling development of transgenic production of hydroxy-fatty acids. We show that germinating seeds of a hydroxy-fatty acid-accumulating Arabidopsis (Arabidopsis thaliana) line produce chlorotic cotyledons and suffer reduced photosynthetic capacity. These seedlings retain hydroxy-fatty acids in polar lipids, including chloroplast lipids, and exhibit decreased fatty acid synthesis. Triacylglycerol mobilization in seedling development is also reduced, especially for lipids incorporating hydroxy-fatty acid moieties. These developmental defects are ameliorated by increased flux of hydroxy-fatty acids into seed triacylglycerol created through expression of either castor acyltransferase ACYL-COA:DIACYLGLYCEROL ACYLTRANSFERASE2 or PHOSPHOLIPID:DIACYLGLYCEROL ACYLTRANSFERASE1a genes. Such expression increases both the level of total stored triacylglycerol and the rate at which it is mobilized, fueling fatty acid synthesis and restoring photosynthetic capacity. Our results suggest that further improvements in seedling development may require specific mobilization of triacylglycerol containing hydroxy fatty acids. Understanding the defects in early development caused by accumulation of modified fatty acids and providing mechanisms to circumvent them are vital steps in the development of tailored oil crops.