Hepatic metabolic derangements are key components in the development of fatty liver, insulin resistance, and atherosclerosis. SIRT1, a NAD+-dependent protein deacetylase, is an important regulator of energy homeostasis in response to nutrient availability. Here we demonstrate that hepatic SIRT1 regulates lipid homeostasis by positively regulating peroxisome proliferators-activated receptor alpha (PPARalpha), a nuclear receptor that mediates the adaptive response to fasting and starvation. Hepatocyte-specific deletion of SIRT1 impairs PPARalpha signaling and decreases fatty acid beta-oxidation, whereas overexpression of SIRT1 induces the expression of PPARalpha targets. SIRT1 interacts with PPARalpha and is required to activate PPARalpha coactivator PGC-1alpha. When challenged with a high-fat diet, liver-specific SIRT1 knockout mice develop hepatic steatosis, hepatic inflammation, and endoplasmic reticulum stress. Taken together, our data indicate that SIRT1 plays a vital role in the regulation of hepatic lipid homeostasis and that pharmacological activation of SIRT1 may be important for the prevention of obesity-associated metabolic diseases.