Adiponectin protects the liver from steatosis caused by obesity or alcohol and therefore the influence of adiponectin on human hepatocytes was analyzed. GeneChip experiments indicated that recombinant adiponectin downregulates aldehyde oxidase 1 (AOX1) expression and this was confirmed by real-time RT-PCR and immunoblot. AOX1 is a xenobiotic metabolizing protein and produces reactive oxygen species (ROS), that promote cell damage and fibrogenesis. Adiponectin and fenofibric acid activate peroxisome proliferator-activated receptor-alpha (PPAR-alpha) and both suppress AOX1 protein and this is blocked by the PPAR-alpha antagonist RU486. Obesity is associated with low adiponectin, reduced hepatic PPAR-alpha activity and fatty liver, and AOX1 was found induced in the liver of rats on a high-fat diet when compared to controls. Free fatty acids and leptin, that are elevated in obesity, failed to upregulate AOX1 in vitro. The current data indicate that adiponectin reduces AOX1 by activating PPAR-alpha whereas fatty liver disease is associated with elevated hepatic AOX1. High AOX1 may be associated with higher ROS well described to induce fibrogenesis in liver tissue but may also influence drug metabolism and activity.