Hepatic steatosis is a hallmark of nonalcoholic fatty liver disease (NAFLD) and a key component of obesity‐associated metabolic dysfunctions featuring dyslipidemia, insulin resistance, and loss of glycemic control. It has yet to be completely understood how much dysregulated de novo lipogenesis contributes to the pathogenic development of hepatic steatosis and insulin resistance. ATP‐citrate lyase (ACL) is a lipogenic enzyme that catalyzes the critical reaction linking cellular glucose catabolism and lipogenesis, converting cytosolic citrate to acetyl‐coenzyme A (CoA). Acetyl‐CoA is further converted to malonyl‐CoA, the essential precursor for fatty acid biosynthesis. We investigated whether dysregulation of hepatic ACL is metabolically connected to hepatic steatosis, insulin resistance, and hyperglycemia. We found that in leptin receptor–deficient db/db mice, the expression of ACL was selectively elevated in the liver but not in the white adipose tissue. Liver‐specific ACL abrogation via adenovirus‐mediated RNA interference prominently reduced the hepatic contents of both acetyl‐CoA and malonyl‐CoA, markedly inhibited hepatic de novo lipogenesis, and protected against hepatic steatosis in db/db mice. Surprisingly, liver‐specific ACL abrogation markedly inhibited the expression of peroxisome proliferator‐activated receptor‐gamma and the entire lipogenic program in the liver. Moreover, hepatic ACL deficiency resulted in significantly down‐regulated expression of gluconeogenic genes in the liver as well as enhanced insulin sensitivity in the muscle, leading to substantially improved systemic glucose metabolism. Conclusion: These findings establish a crucial role of hepatic ACL in lipid and glucose metabolism; therefore, hepatic ACL may serve as a potential target to treat NAFLD and type 2 diabetes. (HEPATOLOGY 2009.)