The biochemical differences between simple steatosis, a benign liver disease, and non-alcoholic steatohepatitis, which leads to cirrhosis, are unclear. Fat aussie is an obese mouse strain with a truncating mutation (foz) in the Alms1 gene. Chow-fed female foz/foz mice develop obesity, diabetes, and simple steatosis. We fed foz/foz and wildtype mice a high-fat diet. Foz/foz mice developed serum ALT elevation and severe steatohepatitis with hepatocyte ballooning, inflammation, and fibrosis; wildtype mice showed simple steatosis. Biochemical pathways favoring hepatocellular lipid accumulation (fatty acid uptake; lipogenesis) and lipid disposal (fatty acid beta-oxidation; triglyceride egress) were both induced by high-fat feeding in wildtype but not foz/foz mice. The resulting extremely high hepatic triglyceride levels were associated with induction of mitochondrial uncoupling protein-2 and adipocyte-specific fatty acid binding protein-2, but not cytochrome P4502e1 or lipid peroxidation. In this model of metabolic syndrome, transition of steatosis to steatohepatitis was associated with hypoadiponectinemia, a mediator of hepatic fatty acid disposal pathways.