Nonalcoholic fatty liver disease is now recognized as the most common liver disease in the United States, with a prevalence of approximately 5% in the general population and up to 25% to 75% in patients with obesity and type II diabetes mellitus. Nonalcoholic fatty liver disease is a clinicopathologic syndrome with a wide spectrum of histologic abnormalities and clinical outcomes. Hepatic steatosis has a benign clinical course. In contrast, nonalcoholic steatohepatitis (NASH) may progress to cirrhosis and liver-related death in 25% and 10% of patients, respectively. Cases occur most commonly in obese, middle-aged women with diabetes. However, NASH may also occur in children and normal-weight men with normal glucose and lipid metabolism. The pathophysiology involves two steps. The first is insulin resistance, which causes steatosis. The second is oxidative stress, which produces lipid peroxidation and activates inflammatory cytokines resulting in NASH. Liver biopsy provides prognostic information and identifies NASH patients who may benefit from therapy. Treatment consists of managing the comorbidities: obesity, diabetes, and hyperlipidemia. Although antioxidant therapy with vitamin E is often used, ursodeoxycholic acid is the only drug that has shown benefit and is the most promising of the drugs currently being investigated. Future therapies will depend on a greater understanding of the pathophysiology and should focus on diminishing fibrosis.