Nonalcoholic fatty liver disease is a metabolic disorder commonly associated with obesity. A subset of nonalcoholic fatty liver disease patients further develops nonalcoholic steatohepatitis that is characterized by chronic liver injury, inflammation, and fibrosis. Recent work has implicated the autophagy pathway in the mobilization and oxidation of triglycerides from lipid droplets. However, whether impaired autophagy in hepatocytes drives excess fat accumulation in the liver remains controversial. In addition, the role of autophagy in protecting the liver from gut endotoxin-induced injury has not been elucidated. Here we generated mice with liver-specific autophagy deficiency by the conditional deletion of focal adhesion kinase family kinase-interacting protein of 200 kDa (also called Rb1cc1), a core subunit of the mammalian autophagy related 1 complex. To our surprise, mice lacking FIP200 in hepatocytes were protected from starvation- and high-fat diet-induced fat accumulation in the liver and had decreased expression of genes involved in lipid metabolism. Activation of the de novo lipogenic program by liver X receptor was impaired in FIP200-deficient livers. Furthermore, liver autophagy was stimulated by exposure to low doses of lipopolysaccharides and its deficiency-sensitized mice to endotoxin-induced liver injury. Together these studies demonstrate that hepatocyte-specific autophagy deficiency per se does not exacerbate hepatic steatosis. Instead, autophagy may play a protective role in the liver after exposure to gut-derived endotoxins and its blockade may accelerate nonalcoholic steatohepatitis progression.