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Fatty liver disease that develops in the absence of alcohol abuse is recognized increasingly as a major health burden. This report summarizes the presentations and discussions at a Single Topic Conference held September 20-22, 2002, and sponsored by the American Association for the Study of Liver Diseases. The conference focused on fatty liver disorders. Estimates based on imaging and autopsy studies suggest that about 20% to 30% of adults in the United States and other Western countries have excess fat accumulation in the liver. About 10% of these individuals, or fully 2% to 3% of adults, are estimated to meet current diagnostic criteria for nonalcoholic steatohepatitis (NASH). Sustained liver injury leads to progressive fibrosis and cirrhosis in a fraction, possibly up to one third, of those with NASH, and NASH may be a cause of cryptogenic cirrhosis. NASH is now a significant health issue for obese children as well, leading to cirrhosis in some. The diagnostic criteria for NASH continue to evolve and rely on the histologic findings of steatosis, hepatocellular injury (ballooning, Mallory bodies), and the pattern of fibrosis. Generally recognized indications for biopsy include establishing the diagnosis and staging of the injury, but strict guidelines do not exist. Liver enzymes are insensitive and cannot be used reliably to confirm the diagnosis or stage the extent of fibrosis. Older age, obesity, and diabetes are predictive of fibrosis. The pathogenesis of NASH is multifactorial. Insulin resistance may be an important factor in the accumulation of hepatocellular fat, whereas excess intracellular fatty acids, oxidant stress, adenosine triphosphate (ATP) depletion, and mitochondrial dysfunction may be important causes of hepatocellular injury in the steatotic liver. Efforts are underway to refine the role of insulin resistance in NASH and determine whether improving insulin sensitivity pharmacologically is an effective treatment. An altered lifestyle may be a more effective means of improving insulin sensitivity. The research agenda for the future includes establishing the role of insulin resistance and abnormal lipoprotein metabolism in NASH, determining the pathogenesis of cellular injury, defining predisposing genetic abnormalities, identifying better noninvasive predictors of disease, and defining effective therapy.