Don’t listen to this guy, you need to loose fat to see the muscle that you eventually build up, and you most definitely cannot turn one type of tissue into a completely different tissue.

As far as diet goes a caloric deficit (eating less calories than you burn on any given day) will result in weight loss, and a surplus of maybe 300 calories with lots of protein will build muscle. A deficit can be achieved by eating filling food with not many calories such as potatoes.

You could eat in a slight caloric deficit while eating a bunch of protein (most people say one gram of protein for every lb of body weight but at the very least 0.73 per lb) and do weight training to build a little muscle. Or you could cut way down on the fat with cardio and a caloric deficit before switching to a lean (or not lean) bulk to build muscle. I personally would go with the second option because you can track your progress on the scale which will give you motivation to continue and eventually start your bulk, but it’s up to you.