Nonalcoholic fatty liver disease (NAFLD) and type 2 diabetes mellitus (T2DM) frequently coexist as they share the pathogenic abnormalities of excess adiposity and insulin resistance. Although type 1 diabetes mellitus (T1DM) is due to a relative lack of insulin, an increased prevalence of obesity and insulin resistance in this population means that NAFLD also commonly coexists with this condition. Both T2DM and NAFLD are associated with adverse outcomes of the other; T2DM is a risk factor for progressive liver disease and liver-related death in patients with NAFLD, whereas NAFLD may be a marker of cardiovascular risk and mortality in individuals with T2DM. Nonalcoholic steatohepatitis-a histological subtype of NAFLD characterized by hepatocyte injury and inflammation-is present in approximately 10% of patients with T2DM and is associated with an increased risk for the development of cirrhosis and liver-related death. Current treatment strategies aim to improve insulin resistance via weight loss and exercise, improve insulin sensitivity by the use of insulin-sensitizing agents (for example, pioglitazone) and reduce oxidative stress by the use of antioxidants, such as vitamin E. Pioglitazone and vitamin E supplementation show the most promise in improving hepatic steatosis and inflammation but have not yet been demonstrated to improve fibrosis, and concern remains regarding the toxicity of long-term use of both of these agents.