Non-alcoholic fatty liver disease or NAFLD is a chronic liver condition characterized by hepatic steatosis and associated with insulin resistance and type 2 diabetes mellitus (T2DM). In many patients fat accumulation leads to steatohepatitis (NASH) with chronic necrosis, inflammation, and fibrosis, and eventually to the development of cirrhosis. Obese and T2DM patients are at the greatest risk for NASH and progressive disease. New diagnostic techniques, such as magnetic resonance imaging and spectroscopy (MRS), have enhanced our way to non-invasively quantify liver fat and suggest that the epidemic of NAFLD is much larger than previously believed. However, the diagnosis of NAFLD for clinicians remains difficult due to a number of factors: limited awareness, non-specific symptoms, few laboratory findings, and the need for a liver biopsy to confirm the diagnosis. Traditional treatment approaches have centered on weight loss, but data are limited on its long-term efficacy, and the overall compliance is poor. Recently, pioglitazone has been shown to be safe and effective in patients with NASH and may radically change our approach to the disease. Still, many aspects remain poorly understood. Taken together, wider use of new diagnostic methods and treatment approaches appears to signal the dawn of a new era in the management of NAFLD.