Fool loses cape on hill (4)
I believe the answer is:
dune
'hill' is the definition.
(I know that dune is a type of hill)
'fool loses cape' is the wordplay.
'fool' becomes 'dunce' (both can mean a stupid person).
'loses' suggests deleting specific letters.
'cape' becomes 'c' (abbreviation used on maps).
'dunce' with 'c' removed is 'DUNE'.
'on' acts as a link.
(Other definitions for dune that I've seen before include "Sandhill" , "Sandy hill" , "Ridge of wind-blown sand" , "Mound of drifted sand" , "Ridge of sand created by wind" .)