Nonalcoholic fatty liver disease (NAFLD) is a serious health problem. Although NAFLD represents a form of lipotoxicity, its pathogenesis remains poorly understood. The aim of this study was to examine the cellular mechanisms involved in free fatty acid (FFA)-mediated hepatic lipotoxicity. FFA treatment of liver cells resulted in Bax translocation to lysosomes and lysosomal destabilization with release of cathepsin B (ctsb), a lysosomal cysteine protease, into the cytosol. This process was also partially dependent on ctsb. Lysosomal destabilization resulted in nuclear factor κB–dependent tumor necrosis factor α expression. Release of ctsb into the cytoplasm was also observed in humans with NAFLD and correlated with disease severity. In a dietary murine model of NAFLD, either genetic or pharmacological inactivation of ctsb protected against development of hepatic steatosis, liver injury, and insulin resistance with its associated “dysmetabolic syndrome.” In conclusion, these data support a lipotoxic model of FFA-mediated lysosomal destabilization. Supplemental material for this article can be found on the HEPATOLOGY website ( (HEPATOLOGY 2004;40:185–194.)