N-Acetylglucosaminyltransferase III (GnT-III) produces "bisecting-GlcNAc" and regulates the branching of N-glycans. GnT-III activity is elevated during hepatocarcinogenesis, which is in contrast to the undetectable level found in normal hepatocytes. To determine the biological significance of GnT-III in hepatocytes, transgenic mice that specifically express GnT-III in the liver were established and characterized. The transgenic hepatocytes had a swollen oval-like morphology, with many lipid droplets. Apolipoprotein B, which contained increased level of bisecting-GlcNAc accumulated in the transgenic hepatocytes. In the transgenic serum, triglycerides, the beta- and pre-beta-lipoprotein fractions, and apolipoprotein B100 were significantly decreased, compared with levels in nontransgenic serum. These abnormal phenotypes were more prominent in the mice with more copies of the transgene and a resulting high GnT-III activity. We demonstrate that aberrant glycosylation, as the direct result of the formation of bisecting-GlcNAc, disrupts the function of apolipoprotein B, leading to the generation of fatty liver. This observation suggests a novel mechanism for the pathogenesis of fatty liver.