Fatty liver has been linked to low aerobic fitness, but the mechanisms are unknown. We previously reported a novel model in which rats were artificially selected to be high capacity runners (HCR) and low capacity runners (LCR) that in a sedentary condition have robustly different intrinsic aerobic capacities. We utilized sedentary HCR/LCR rats (generation 17; max running distance equalled 1514 ± 91 vs. 200 ± 12 m for HCR and LCR, respectively) to investigate if low aerobic capacity is associated with reduced hepatic mitochondrial oxidative capacity and increased susceptibility to hepatic steatosis. At 25 weeks of age, LCR livers displayed reduced mitochondrial content (reduced citrate synthase activity and cytochrome c protein) and reduced oxidative capacity (complete palmitate oxidation in hepatic mitochondria (1.15 ± 0.13 vs. 2.48 ± 1.1 nm g−1 h, P < 0.0001) and increased peroxisomal activity (acyl CoA oxidase and catalase activity) compared to the HCR. The LCR livers also displayed a lipogenic phenotype with higher protein content of both sterol regulatory element binding protein-1c and acetyl CoA carboxylase. These differences were associated with hepatic steatosis in the LCR including higher liver triglycerides (6.00 ± 0.71 vs. 4.20 ± 0.39 nmol g−1, P= 0.020 value), >2-fold higher percentage of hepatocytes associated with lipid droplets (54.0 ± 9.2 vs. 22.0 ± 3.5%, P= 0.006), and increased hepatic lipid peroxidation compared to the HCR. Additionally, in rats aged to natural death, LCR livers had significantly greater hepatic injury (fibrosis and apoptosis). We provide novel evidence that selection for low intrinsic aerobic capacity causes reduced hepatic mitochondrial oxidative capacity that increases susceptibility to both hepatic steatosis and liver injury.