Nonalcoholic fatty liver disease (NAFLD) is present in up to one third of the general population and in the majority of patients with metabolic risk factors such as obesity and diabetes. Insulin resistance is a key pathogenic factor resulting in hepatic fat accumulation. Recent evidence demonstrates NAFLD in turn, exacerbates hepatic insulin resistance and often precedes glucose intolerance. Once hepatic steatosis is established, other factors including oxidative stress, mitochondrial dysfunction, gut-derived lipopolysaccharide and adipocytokines, may promote hepatocellular damage, inflammation and progressive liver disease. Confirmation of the diagnosis of NAFLD can usually be achieved by imaging studies, however staging the disease requires a liver biopsy. NAFLD is associated with an increased risk of all-cause death, probably because of complications of insulin resistance such as vascular disease, as well as due to cirrhosis and hepatocellular carcinoma, which occurs in a minority of patients. NAFLD is also now recognized to account for a substantial proportion of patients previously diagnosed with 'cryptogenic cirrhosis'. Diabetes, obesity and the necroinflammatory form of NAFLD known as non-alcoholic steatohepatitis, are risk factors for progressive liver disease. Current treatment relies on weight loss and exercise, although various insulin-sensitizing medications appear promising. Further research is needed to identify which patients will achieve the most benefit from therapy.