Schisandra chinensis (SC), a traditional herbal medicine, has been prescribed for patients suffering from various liver diseases, including hepatic cancer, hypercholesterolemia, and CCl₄-induced liver injury. We investigated whether SC extract has a protective effect on alcohol-induced fatty liver and studied its underlying mechanisms. Rats were fed with ethanol by intragastric administration every day for 5 weeks to induce alcoholic fatty liver. Ethanol treatment resulted in a significant increase in alanine aminotransferase, aspartate aminotransferase, and hepatic triglyceride (TG) levels and caused fatty degeneration of liver. Ethanol administration also elevated serum TG and total cholesterol (TC) and decreased high-density lipoprotein (HDL) cholesterol levels. However, after administration of ethanol plus SC extracts, the ethanol-induced elevation in liver TC and TG levels was reversed. Elevation in serum TG was not observed after treatment with SC. Moreover, compared with the ethanol-fed group, the rats administered ethanol along with SC extracts for 5 weeks showed attenuated fatty degeneration and an altered lipid profile with decreased serum TC and TG, and increased HDL cholesterol levels. Chronic ethanol consumption did not affect peroxisome proliferator-activated receptor γ (PPARγ) levels, but it decreased PPARα and phospho-AMP-activated protein kinase (AMPK) levels in the liver. However, SC prevented the ethanol-induced decrease in PPARα expression and induced a significant decrease in sterol regulatory element-binding protein-1 expression and increase in phospho-AMPK expression in rats with alcoholic fatty liver. SC administration resulted in a significant decrease in intracellular lipid accumulation in hepatocytes along with a decrease in serum TG levels, and it reversed fatty liver to normal conditions, as measured by biochemical and histological analyses. Our results indicate that the protective effect of SC is accompanied by a significant increase in phospho-AMPK and PPARα expression in hepatic tissue of alcoholic rats, thereby suggesting that SC has the ability to prevent ethanol-induced fatty liver, possibly through activation of AMPK and PPARα signaling.