E. Cobham Brewer 18101897. Dictionary of Phrase and Fable. 1898.
Fat.
All the fat is in the fire. The allusion is to the process of frying. If the grease is spilt into the fire, the coals smoke and blaze so as to spoil the food. The proverb signifies that something has been let out inadvertently which will cause a regular flare up.